Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (17) | Ignore Thread Prev | Next
Author: carylanne Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121316  
Subject: Re: Incorporating Date: 6/16/1999 10:42 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
I have a defined contribution "Keogh" plan via Vanguard. I can contribute up to $30K or 20% of my Schedule C net income up to a max of $30K. This plan is a master plan preapproved by the IRS and is very inexpensive to administer. Vanguard does most of the IRS reporting. My accountant and I file an additional form (5500 ?)annually. No big deal.

My husband has a defined benefit "Keogh" plan which is administered by a benefit management firm as a self-employed retirement plan. Because of actuarial assumptions, lenght of self-employment, compensation level, investment returns, AGE (very important - the older the individual the greater the amount which can be contributed in order to make up for "lost" years) he has been able to contribute between $20K and $43K annually to this tax deferred plan. It costs about $2,500 annually to administer but can come out of plan proceeds or out of company funds. $2,500 sounds like a lot, but the major cost is the actuary and this cost is fixed. As assets grow, the expense ratio becomes much smaller and the opportunity for significant tax savings is very attractive. Also the IRS is Very Picky about these plans and it is necessary to have highly qualified individuals monitoring the paperwork.

The downside of these plans is that you MUST make the contribution each year unlike an IRA which is optional. That said, it is great discipline and even if you have to borrow short term to fund your plan, you will be ahead of the game long term in saving for your retirment.

The other downside is that if you have employees, you must contribute to a plan for them at the same rate that you contribute for yourself. This can become VERY expensive. That is why we downsized our operation and ceased to be employers except for ourselves. We had less revenue on the top line but more net income to ourselves.

To check into this go to any search engine and research Keogh plans. Also Benefit Planning Consultants or Pension Plan Consultants in the Yellow Pages will assist you. Do Not go with an insurance company or Bank for these plans. You can self-administer yourself with the assistance of a consultant who will employ an actuary and provide the IRS preapproved master plan.

For example, my husband's plan is self-administered and assets are in Janus Funds, a brokerage firm, Fidelity, Nicholas, and Scudder, and real estate. Very flexible if you so choose.

Good Luck!
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (17) | Ignore Thread Prev | Next

Announcements

Disclaimer:
In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
Pencils of Promise - Back to School Drive
"Pencils of Promise works with communities across the globe to build schools and create programs that provide education opportunities for children."
Post of the Day:
Value Hounds

Netflix Riles Investors
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement