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Author: BostonBomber Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75340  
Subject: SIMPLE IRA Date: 8/20/2001 8:58 PM
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Greetings all,

I have a "real" full-time job and also do some sole-proprietor-type work on the side that generates a moderate amount of income for me. I've maxxed out on the ROTH and am trying to figure out another option for retirement investing besides the 401(k) since my employer does not match.

I've done preliminary reading on the SIMPLE IRA. Does anyone have experience with this? It seems I can use this as a self-employed, sole-proprietor; however, do I need to have been making contributions all year long, or can I make a contribution at the end of the tax year?

Any help would be appreciated--I've looked all over and remain confused.

Thanks in advance!
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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 31527 of 75340
Subject: Re: SIMPLE IRA Date: 8/21/2001 8:21 AM
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Greetings, BostonBomber, and welcome. You asked:

I have a "real" full-time job and also do some sole-proprietor-type work on the side that generates a moderate amount of income for me. I've maxxed out on the ROTH and am trying to figure out another option for retirement investing besides the 401(k) since my employer does not match.

I've done preliminary reading on the SIMPLE IRA. Does anyone have experience with this? It seems I can use this as a self-employed, sole-proprietor; however, do I need to have been making contributions all year long, or can I make a contribution at the end of the tax year?


You should read the sections on SEP, Keogh and SIMPLE plans in my Foolish Retirement Plan Primer as well as IRS Publication 560, Retirement Plans for Small Business, available at http://www.irs.ustreas.gov/forms_pubs/pubs.html. Both will give you a good overview of what's available for your self-employed money.

Be aware that a SIMPLE of Keogh contribution must be coordinated with a contribution to your employer's 401k in your other job. The contributions to these plans combined by not exceed $10,500 this year. A contribution to a SEP does not fall under this limit, so the SEP (besides being far simpler to set up and administer) may be the best bet for you in maximizing what you may put away each year between your regular job and your self-employment.

As to making the contribution as a self-employed person, you can do that up until the due date of your income tax return. You will find the deadlines explained in Pub 560. Therefore, you do not have to make those contributions based on your self-employed income until you know what that net income will be for the year.

Regards..Pixy

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Author: cdr46 Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 31535 of 75340
Subject: Re: SIMPLE IRA Date: 8/21/2001 11:18 AM
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"I've done preliminary reading on the SIMPLE IRA. Does anyone have experience with this? It seems I can use this as a self-employed, sole-proprietor; however, do I need to have been making contributions all year long, or can I make a contribution at the end of the tax year?"

I would do more than just "preliminary reading" on the subject.

..."I've looked all over and remain confused."

http://www.onmoney.com/editorial/guides/understanding_ira_401k/understanding_ira_401k_step1.html
http://www.onmoney.com/editorial/guides/understanding_ira_401k/understanding_ira_401k_step13.html

You can also perform a google search for "retirement planning".
Searched the web for "Retirement Planning".
http://www.google.com/search?q=%22Retirement+Planning%22&sa=Google+Search&cat=&hl=%28null%29

If, after researching the fairly comprehensive information at the above sties, you are still confused you should consider paying a professional to sort things out for you. I do not say this to sound crass or to be unkind. A "simple" solution can cause MAJOR problems down the road.

Good Luck


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Author: cdr46 Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 31540 of 75340
Subject: Re: SIMPLE IRA Date: 8/21/2001 12:31 PM
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"A "simple" solution can cause MAJOR problems down the road."

I should have explained this. A very successful Realtor friend of mine set up a SEP many years ago. Through the years she hired (off and on) a clerical helper. You guessed it, my friend only funded the SEP on her behalf and ignored the clerical helper.

The clerical helper threatened to sue unless my friend reimbursed her "UPFRONT" and under the table for back SEP contributions. My friend refused and fired the helper. Things quickly became nasty - name calling on both sides. The helper complained to the IRS and the Department of Labor. My friend countered - stating that the helper wanted her compound a wrong by yielding to "extortion". Things really got ugly!

To make a long story short:

The helper eventually got her back retirement benefits - but not upfront and under the table. My friend was subjected to an audit conducted by a power hungry megalomaniac employee of the IRS - and learned a very valuable lesson - a "simple" solution can cause a MAJOR problem down the road.

No I did not know that my friend had set up a SEP until after the "you know what" hit the fan.

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Author: BostonBomber Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 32020 of 75340
Subject: Re: SIMPLE IRA Date: 9/29/2001 9:07 AM
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Pixy and All,

Thanks much for the feedback. I have been doing some reading into the SEP-IRA and am thinking that you are correct in suggesting it would be a better option for me. One follow-up question, however: Assuming I maximized my Roth contribution for 2001, could I place an additional amount of money into the SEP-IRA, then roll that over into a "traditional IRA," then convert that traditional IRA into a Roth IRA (all in 2001)?

Thanks Much,
BB

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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 32025 of 75340
Subject: Re: SIMPLE IRA Date: 9/29/2001 3:52 PM
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BB asks:

Assuming I maximized my Roth contribution for 2001, could I place an additional amount of money into the SEP-IRA, then roll that over into a "traditional IRA," then convert that traditional IRA into a Roth IRA (all in 2001)?

Yes, you could. And you wouldn't have to transfer to another traditional IRA first, either. Once the SEP contribution is made, the SEP-IRA becomes just like any other traditional IRA. All you would have to do is convert the SEP-IRA money to a Roth. Surprisingly, this is one way to super-charge a contribution to a Roth so you can exceed the annual contribution limit this year of $2,000. Of course, you lose the tax deduction for the SEP contribution when you do that.

Regards..Pixy




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