Here is the Quickie:
1.Depends on how much you want to contribute to the retirement plan &
2. How many employees you have.
Here is the basic breakdown for the different retirment plans:
SEP--The business writes the check into this account, therefore it is considered a Business Contribution. This is great if your self employed with no employees. It is not good if you have a few employees as you have to make contributions for them as well. No big administration cost to run the plan and very easy to administer(you just need to tell the CPA how much you contributed). Max contribution is 25% of compensation up to $46,000.
Solo 401k---There are 2 pieces to this. 1 is the employee will defer his/her salary into the plan(max is $15,500 if under age 50 an $20,500 if over the age 50). Second, you can layer a profit sharing plan contribution on top of it. In english, the business can (it does not have to) make an additional contribution of 25% of the total compensation to a maximum total contribution into this plan of $46,000 per person(the same as the SEP). This plan is great if you and your spouse own a business together. Once you have more than $250,000 of assets in the plan, you will need to pay your CPA or a Pension Plan administrator to file a 5500. Depending on where you live, this could cost $1,000-$2,000 a year.
Simple IRA--Like a 401k, but a little smaller. Employees defer salary into the plan (max $10,500 if under 50 and $13,000 if over age 50) and business has to decide how much to match the employee`s contribution (can be 1%, 2% or 3% of employee`s salary).
Remember: This is not a binding agreement. You could always change your plan the next calender year if you are unhappy with the way it is structured or if you hire more employees.
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Christopher Acheson
Financial Advisor
New England Financial
cacheson@ny.nef.com
516-357-1893
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). Let`s assume for sake of argument that I want to put in between 15K-20K a year in the account and I may make anywhere between 80K-100K a year on my self-employment (of course, you never know with self-employment). My brokerage offers both a SEP and Solo 401K to me.
