Hi there and thank you for stopping by today. Today I’m going to talk about part two of a two part series on Sep IRAs versus Solo 401k plans. I spoke about Sep IRAs in the previous video, session one. Today session two, I’m going to talk about Solo 401Ks.
My name is Tina Anders. I am the Fee Only Certified Financial Planner for my firm located here in Petaluma, California, Anders Wealth Management. I serve primarily Sonoma and Marin counties here in California.
A Solo 401k plan is limited to business owners and a spouse who is also involved in the business. A solo 401k plan offers the opportunity to make both employee contributions and employer profit sharing contributions. The employee contributions are limited to the same as for regular employer sponsored retirement plans: $19,500 in 2020, with an additional $6,500 catch up contributions for those who are 50 years or older.
Additionally, employer profit sharing contributions can be made up to 25% of the employee compensation with a combined maximum employee and employer contributions of $57,000 and $63,500 for those 50 or over. And those numbers are for the year 2020. You’ll have until your tax filing date, including extensions to make your actual employee contributions and employer profit sharing contributions.
Unlike a SEP IRA, a Solo 401k can offer a Roth option, that’s after tax contributions, for the employee only contributions. All profit sharing contributions must be made to a traditional non Roth 401k plan. Additionally, loans can be taken for the plan if allowed in the plan document?
Which plan is better for you? Would it be a solo 401k plan? Or would it be a SEP IRA? A SEP IRA is easy to set up, requires virtually no administrative work. The ability to establish and to fund the account right up until your tax filing date offers a high degree of flexibility for you.
With income that varies from year to year you might be better off contributing to a solo 401k. Since the amount that can be contributed to the SEP is totally dependent on your earnings. The amount you can contribute will be limited in years where your income wanes a bit as long as you earn at least $19,500. If you’re under the age of 50, or $26,000, if you’re 50 or older, you can contribute those amounts under the employee contribution component of your 401k.
If you want to be able to make Roth contributions, or you want to be able to take a loan out from your plan, a solo 401k is the better option because you don’t have either option with a SEP IRA. In general if you’re self employed, and you don’t have any employees, and you consistently want to be able to maximize your retirement contributions, a Solo 401k will probably be the best option for you.
Thank you for stopping by. If you have any comments, questions, topics on what you would like me to do a video please comment below and I will respond. Tina Anders, Anders wealth management in your corner. Thank you again.
Hi there and thank you for stopping by today. Today I’m going to speak to you about SEP IRAs and solo 401(k) retirement plans. It’s going to be a two video session. First I’m going to talk to you about SEP IRAs.
My name is Tina Anders. I am the Fee Only Certified Financial Planner for my firm located here in Petaluma, California, Anders wealth management. I serve primarily Sonoma and Marin counties here in California.
Again, thanks for stopping by. So, I’m going to talk about starting with SEP IRAs, Simplified Employee Pensions. Simplified Employee Pensions or SEP plans are easy to establish, and they’re good for business owners with relatively high contribution levels, depending on your income level.
All contributions made to SEP IRAs are employer contributions. Unlike a 401(k) plan, there are no employee contributions. Contributions can be made for up to 25% of your compensation up to a limit of $57,000 for 2020.
For some sole proprietors, that actual contribution rate might be limited 20% of their compensation due to the way in which self employment income flows through the calculation.
A SEP IRA can be established up until the point you file your taxes including an extension. Also, a SEP account holder, generally speaking, can invest in anything that an IRA traditional or Roth can be invested in at your custodian.
A SEP IRA can be opened by a sole proprietor, corporation, including S or C, partnerships and other types of small business entities. Contributions to a SEP on behalf of the owner or the employee are immediately vested. And a couple more things, there’s no Roth option for a SEP IRA like there is for a solo 401(k) which we’ll get to in our next video.
And also loans are not available up against your SEP IRA as they are in solo 401(k)’s which we’ll talk about in the next video. And I’m also going to talk to you about which plan seems to be better for most people, a SEP IRA or a solo 401(k) plan?
Again, thank you for stopping by today. Tina Anders Anders wealth management in your corner always.
Hi there and thank you for stopping by today. I am going to talk about annuities in part one of two videos on annuities. My name is Tina Anders. I am the fee only Certified Financial Planner for my firm located here in Petaluma, California, serving primarily clientele in Sonoma, and Marin counties.
And I’m here again to talk to you about part one of two videos on annuities. Excuse me. So, what is an annuity? An annuity is a financial product that pays out a fixed stream of payments to an individual. And these financial products are primarily used as an income stream for retirees.
Annuities are contracts issued by insurance companies which invest dollars from individuals and they help individuals address the risk of outliving their savings, which is a very significant risk. So, while annuities can be beneficial in some specific circumstances, they are less than optimal investments. And most individuals are likely to benefit more from a well diversified portfolio of stocks and bonds in a portfolio that is for capital and wealth preservation.
Despite how they’re often sold, annuities are insurance contracts and not investments. An annuity transfers a portion of the risk of investing from the client to the insurance company and the insurance company charges annual fees, sometimes upwards of 5 to 7% from the account balance in order to take on the investment risk.
So, annuities have four basic fees within the contract.
They have an investment management charge, which is much like what a mutual fund company charges to manage the investments.
They have an administrative charge that covers the insurance company’s operating expenses and profit.
They have a mortality and expense risk charge to pay for the life insurance built into the annuity, as well as other risks to the insurance company.
And finally, they have what’s called a surrender charge, which is a fee to encourage you to keep the annuity contract for a period of time without having to surrender any of your account balance. And the period is usually up to about 10 years. So, this the surrender charge is there to allow the insurance company to make enough money to pay for the salespersons commissions, oftentimes. If you want to pull your money out before the surrender charge period, you will have to give up some of your account balance in order to pull your money out.
So, when does it make sense to own an annuity? Well, if you have maxed out your tax advantaged retirement plans, your Roth IRA, your traditional IRA, your health savings accounts, your 529 College Savings Accounts, your 401k or 403B or other employer sponsored retirement plan, then it may make sense to then take additional funds that you have to invest and put them into an annuity contract so that you have another income stream in retirement.
Another reason it might be good to have an annuity. If you’re dealing with a lot of stress because of the volatility of the market, and I would include the COVID related volatility, then it might be helpful to take a portion of your portfolio and put it in an annuity contract so that you can rely on an income stream down the road, thereby removing some of your stress. Because financial peace of mind is of the utmost importance.
Another reason to own an annuity is if you need to provide for basic living expenses. Now, Social Security is designed to do that but if Social Security isn’t going to be enough, it might behoove you to place a portion of your portfolio in an annuity contract in order to help provide for basic living expenses in retirement.
If you have comments, questions, topics on which you would like me to provide a video, please comment below and I will be sure to do my best to help out. Thanks for stopping by again and always I am in your corner
Thank you for stopping in. My name is Tina Anders. I am the Fee Only certified financial planner for Anders Wealth Management located here in Petaluma, California.
I’m here to talk to you today about the Secure Act. Secure is an acronym which stands for Setting Every Community Up for Retirement Enhancement. Also want to say thank you for your patience because I am filming at home because of shelter in place. Okay, so the Secure Act has to do with many, many things. But I’m going to talk to you mostly about how it’s addressed with individual retirement accounts, which I will call IRAs,
You can contribute now, to an IRA, as long as you’re working. It used to be that even if you were working past the age of seventy and a half, you couldn’t contribute past the age of seventy and a half. Now you can contribute for your entire working career.
Secondly, that I want to point out is required minimum distributions. So, these are distributions that come from a traditional or other IRA, not Roth IRA, which are required at a certain age. It used to be seventy and a half, you can prolong that until the age of seventy-two.
Qualified charitable distributions, I will call these QCD’s. QCD’s are a great way to transfer money directly from your individual retirement account to a qualified charity. Use to be that people used these in lieu of taking required minimum distribution. However, that has been prolonged until the age of 72, required minimum distributions, RMDS. So, you can still do a QCD at the age of seventy and a half. Okay, up to $100,000. I’m going to talk about QCD’s in another video, but I just want to let you know you can do them at the age of seventy and a half.
IRA money can be taken without penalty for child births and adoptions. There are rules involved, so check with me. If you have questions about that happy to walk you through the process. foster care workers also may contribute to individual retirement accounts. The thing is, there are rules there as well. So please reach out for clarification before you make a contribution as a foster care worker because you don’t want it to end up as taxable income.
529 plans are college savings plans, and you are now able to use up to $10,000 from your 529 plan to repay student debt. You can also take money from your 529 plan, new this year, to use for apprenticeships.
I want to also talk to you about annuities, employer sponsored retirement plans, such as 401K’s, 401A’s 457, 403B’s etc, etc. So Many, you will see more annuities available in employer sponsored retirement plans. And if you want to talk about that we can certainly do so. Also, want to tell you about graduate students and postdoctoral students. If you’re receiving a stipend and or a fellowship, you are able to contribute to an individual retirement account. So, you can see that there’s a shift in that an encouragement to start putting money away.
Thank you again for stopping by. If you have any questions, comments, or you have a topic you’d like me to talk about, please either email me at [email protected] or go to my contact page on my website at anderswealth.com and fill out as much or as little as you want on the contact page. But at the bottom, there’s a text box, put in whatever you want to make sure that I see and I will reply to you. And if you want me to talk about a topic, I will do my best to do so. Thanks again for stopping by. I am in your corner.