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I think the IRS says that SEP-IRAs are also for self employed.

http://www.irs.gov/Retirement-Plans/Ret ... yed-People

jwaggs wrote:I think the IRS says that SEP-IRAs are also for self employed.

http://www.irs.gov/Retirement-Plans/Ret ... yed-People

Well.............there ya go! I wonder what the advantage is of that over a plain vanilla IRA?

I believe you can contribute pre-tax quite a bit more with a SEP-IRA. When I was freelancing, I thought about setting one up, but I couldn't even hit the $5,000 or so minimum under the plain vanilla IRA when I was freelancing. I might have not even EARNED that much a year.

Yesterday I decided to post about 401k and yakked about IRAs.

A 401(k) program is a profit sharing plan that allows participant contributions. The employer contribution to Profit Sharing is limited to 15% deductible. The employer may chose to match participant contributions but is still limited to 15% Most 401ks usually have an employer contribution of much less, maybe up to 6% which is usually subjected the plan vesting schedule. I believe the amount of participant contribution has a dollar limit, but I don't know what it is now.

The old Defined Benefit programs have pretty much disappeared because of the mandatory employer funding requirements. 401k really has no mandatory employer contribution beside the cost of administering the plan. Most plans today have a menu of various mutual funds available to the participant. Some have the fund managed by third party investment companies.

If someone can set aside 6% from age 40, and conservatively invests it, there will be sufficient funds available at retirement.

moldyfigg wrote:If someone can set aside 6% from age 40, and conservatively invests it, there will be sufficient funds available at retirement.

Yes - anyone who works for a company that offers any form of 401k matching should contribute at LEAST enough to get that. Consider it part of your total compensation that you will be throwing away if you don't take advantage of it.

Of course, the more you can contribute the better, over the long term.

It always amazed me how many of my fellow employees did not take advantage of the 401(k) benefit and free money that comes with it. And the people that raided their 401(k) multiple times and paid the exorbitant penalties for no good reason. Crazy.

Jimmy Cantiello wrote:It always amazed me how many of my fellow employees did not take advantage of the 401(k) benefit and free money that comes with it. And the people that raided their 401(k) multiple times and paid the exorbitant penalties for no good reason. Crazy.

It happens WAY to often, I'm sure.

We administered dozens of 401ks and would do our best to dissuade participants from taking early distributions. They would still do it.

jwaggs wrote:I believe you can contribute pre-tax quite a bit more with a SEP-IRA. When I was freelancing, I thought about setting one up, but I couldn't even hit the $5,000 or so minimum under the plain vanilla IRA when I was freelancing. I might have not even EARNED that much a year.

Fidelity linked me to one of their retirement tips advice pieces, and in it there was a table which included the SEP rules:

Must be a sole proprietor, a business owner, in a partnership, or earn self-employment income by providing a service

Contribution Limits, Lesser of:
25% of compensation
$52,000

stonemonkts wrote:

jwaggs wrote:I believe you can contribute pre-tax quite a bit more with a SEP-IRA. When I was freelancing, I thought about setting one up, but I couldn't even hit the $5,000 or so minimum under the plain vanilla IRA when I was freelancing. I might have not even EARNED that much a year.

Fidelity linked me to one of their retirement tips advice pieces, and in it there was a table which included the SEP rules:

Must be a sole proprietor, a business owner, in a partnership, or earn self-employment income by providing a service

Contribution Limits, Lesser of:
25% of compensation
$52,000

I believe freelancing would be considered "income by providing a service." And if the contributions would be less 25% of compensation, that would put me at about $0.50 a year for my SEP-IRA, which is one reason why I didn't bother to pursue it.

At 62, I am still trying to save. I am saving probably close to 25-30% of my income (it varies from month to month, so I don't know a definite figure). Does it make sense to throttle back on that at some point? My thought is that I should save as much as possible to leave my kids, but I don't want to needlessly deprive myself of a few luxuries. I know. It's up to me. But I was wondering if anyone else pondered questions like this.

jwaggs wrote:At 62, I am still trying to save. I am saving probably close to 25-30% of my income (it varies from month to month, so I don't know a definite figure). Does it make sense to throttle back on that at some point? My thought is that I should save as much as possible to leave my kids, but I don't want to needlessly deprive myself of a few luxuries. I know. It's up to me. But I was wondering if anyone else pondered questions like this.

If you can afford it, you might as well keep on saving. Why not? On the other hand, 25-30% is a pretty hefty percentage, so you could probably cut that down a little if it would make your life easier.

When you reach 70 1/2 you are required to start taking distributions from IRAs, so that would be your end point as far as that goes.

Jimmy Cantiello wrote:A 20% drop would give me a fucking heart attack.

Jimmy, some advice I've heard over the years that I intend to live by is that you should not have money invested in equities that you'll need to use in the next 7-10 years. I do plan to continue, post-retirement, to stage money that I'll need down the road with this in mind.

It's hard to watch when the markets take a beating, but my wife and I have made a shitload of money by saving well during the period after 2007. We're a ways off from retirement, though. Even people that were already retired in 2007 and were no longer saving would have been more than fine too as long as they didn't have any money they needed to use over the next several years tied up in equities. I know it's hard to stomach, but risk should be mitigated by a smart timing.

I agree with you, Lenny. I was always told the closer one gets to retirement the more conservative one's portfolio should be. Being retired, my investments are 100% stable. However, it's been that way for the last 15 years or so of my working life. Because I was so "gun shy" my interest gains were minimal during that period. Oh well, too late now. I'm not complaining, though. I did ok.

Jeff, here's my take on saving in order to leave something to my kids; I don't believe in it. It's hard enough in this day and age to work for 50 plus years and hopefully end up with a financially worry-free retirement. The way I look at it, my parents didn't leave any of their kids jack shit. Of course that was mainly because all resources were used to raise seven of us children. What they did was to teach us how to do for ourselves and work for everything we got. My old man always said, "Don't ever expect that anybody is going to hand you something. If you want something you have to go out and work for it". Me and everyone of my brothers and sisters did well in life. We want for nothing. We are self sufficient and feel fortunate that our parents did not "catch fish for us". Instead they "taught us how to fish". That lesson was invaluable, imo.

My kids already know that if I have my way, by the time I kick the bucket, all my money will have been spent on enjoying my well deserved retirement. And...the check that I leave behind to pay for my cremation will be the only check I ever wrote that will bounce like a rubber ball.

If by chance some money is left after my demise, they will split it 50/50.

Jimmy -- that's pretty much the way my wife feels, too.

My oldest daughter is a nurse practitioner, my middle daughter, only 26, has saved around $40k for her retirement ALREADY. And my youngest is going back to school to get her BSN to become a nurse. All three should do okay, so I know I shouldn't worry too much about them. The oldest is making more at 30 than my wife is now, after 18 years as a public school teacher.

I agree with you guys. I will not intentionally leave my kids anything. I sent my daughter through school, and, unlike many of her friends, she'll graduate from college debt-free. That's a huge thing. We'll also pay for what I'm sure will be a ridiculous wedding. We'll end up leaving them the house we live in and whatever else is left when we kick the bucket, but that will be all be accidental.

Or we could really screw them and do a reverse mortgage .

LennyH wrote:
Or we could really screw them and do a reverse mortgage .

No kids here to leave anything to, so if my plans work out, I will reverse mortgage the hell out of this property. Six more years before that option becomes available.

There a lot of excellent local charities that can use the bread.

Got a package in the mail from my son-in-law, who is a professional carpenter. He sent us drawings on how he would build an "in-law" apartment for us in our house.

The house we live in has been in my wife's family for 150 years. For that whole time, it's been multigenerational.

My wife grew up with her parents and her grandmother. We raised our kids here with her parents. Her dad died a year ago this month, so it's just been us in the house for the past year.

There are separate kitchens and separate living areas in a 2400sq.ft. house. We have 56 acres.

My oldest daughter, son-in-law and grandson plan on moving here in about 12-18 months. If all goes according to plan, we'll have a "new" 620sf first-floor apartment to live in. My daughter and her family will have half of the first floor and the entire second floor. They plan on having another kid, so they'll be four of them, and two of us. At one point, there was seven in the house -- grandparents, us and our three kids, so I don't think six will be overwhelming. Plus, it will be redesigned in a way we'll have a lot more privacy this time around.

By the time they move in, my wife will be retired from her school teaching job and we will both be working part-time out of the house. I have a 10-hour-a-week gig that I can do on my laptop. My wife will teach violin.

This should help us all of us out a lot. They'll have full-time, built-in child care. We'll have someone who can maintain the house and all of our out buildings (barns, chicken coops, sheds, etc., all of which are in serious need of attention.)

Anyway, we are pretty excited.

Sounds like a plan!

I'm probably better off than most, but not where I'd like to be. At one point, Glenda and I had amassed enough to retire (according to our investment counselor) 'if we played our cards right.' We did, over 10 years ago and I have loved almost every minute of it.

But playing our cards right didn't include some of the things we did in the interest of enjoying...or dealing with...life. We moved to Mexico and bought a house (for cash--no other way to do it). We eventually bought 5 acres down here and built a house and recording studio; we had to deal with breast cancer and though most of the medical costs were eventually reimbursed, we spent over 100K in peripheral costs (car rentals, hotels, house rentals for 9 months in the states during treatment, travel, etc). A couple of years later, we separated and divided all of our assets in two, as evenly as we could. Most of our money was either in our IRAs or in our properties. I gave her the dream house, I got 66% of the first house which we rented out for a few years and shared the income, all while I was spending a small fortune getting set up in my new life and be happy again.

So now, I am one of those idiots who has to take occasional distributions from his IRA because he doesn't have enough income from gigging in Mexico to survive. I'm not 59.5 yet, so I pay the penalty every time.

The good news is:

I don't have kids or anyone counting on me leaving them money when I die;
My life partner Denise has two daughters but there is some wealth and great love on both sides of their families so helping them out if need be will never fall just on my shoulders;
I still have about $300K in my IRAs, and I own (and live in) our first Mexican house which is worth about $300K now (Glenda left me her 33% when she passed in January). I can pull in about $800-$1000 a month via gigging if I want to.
In a couple of years, I will take early SS which will cover at least half of my monthly nut of living expenses.

The bad news is that I have an expensive passion of making albums using amazing musicians, and even though I'm skilled produce and home recording engineer, these types of projects cost a ton--I have a new project in the formulative stages that will probably cost $10K to pull off. Time for crowdfunding, perhaps.

On a day to day basis, I'm fine. But if I live another 25 years, I could be fucked.

Doug,

Sounds like you must be close to 59.5

We have a very diversified portfolio - mutual funds, REITs, no individual real estate except our house, with a tiny mortgage, in a market were prices are credulously high.

All mutual funds make statement that they can do things better than the other guys. All cats are black in the dark.

Our best MF has been the Mass Mutual Utilities which has averaged about 9% for the last 20 years.

I doubt if we will outlive our assets. There are a couple of local charities which will greatly benefit.

BTW a SEP-IRA is funded with after tax money. Withdrawals are not taxed.

To the baby boomer generation, "retirement"; usually means finding a different job.
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