The question of IRA vs 401k jumps to mind when you set up a small business plan for retirement. Do you know the differences between plans? What is the Internal Revenue Code allow and restrict? Why should you even care? Because the annuity if you sell fixed indexed and want to capitalize on a Market hottest specialty is today (establishing retirement plans for owners of small businesses 1 to 9 employees) you'll want to refresh IRA vs 401k and other important considerations.
First, consider a small business plan retirement, today more than ever, is the best way to defer large amounts of dollars tax deductible. Thank you to the economic growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), self taxpayers now have unprecedented incentives to save for retirement. The decision of a business owner is quite literally whether to keep the profits Business … or send them to Uncle Sam
OWNER becomes
It's no secret the allure of retreat small business plan is directly related to benefits available to the owner. The greater part of the owner of the overall plan, plus interest. Before the new tax legislation, restrictions on ownership benefits plan design often leads to lower profits even less employees. But the tools are now in place to inflate the benefits of the owner and still create a workable plan for employees. Thus, the plan should be an IRA or 401k? Let IRA vs 401k separately.
SIMPLIFIED EMPLOYEE PENSION
The most simple small pension business for the independents and the taxpayers the easiest to configure and maintain the simplified employee pension (SEP). You may establish a September if you earn income from self-employment, regardless of whether you have employees. A SEP is an Individual Retirement Account (IRA) and is maintained for more than one person becomes a group of IRAS.
All contributions to September are tax deductible as a business expense. As the income of the IRA plan are not taxed until they are withdrawn at retirement. As usual, withdrawals before age 59 ½ with this and other plans to incur a penalty of 10%. A SEP-IRA can not loan or deferral of employee contributions. Also, the individual annual contribution limit for 2006 is less than 25% of compensation or $ 44,000, and contributions may be reduced when jumping in the lean years.
INDIVIDUAL 401 (k)
Another useful tool for the toolbox EGTRRA is the individual or solo 401 (k). The retirement plan for small businesses is ideal for businesses where the owner or owners (and their spouses if working at the company) are the only employees. The main reason for opening one-person 401 (k) is the largest contribution limits allowed, and the fact that contributions are based on revenue generated by the company.
The maximum tax sur-deductible employer contribution is 25% of gross eligible payroll. For 2006, the effective contribution maximum deferral of wages for the employer and that employee is $ 44,000 plus a catch-up contribution of $ 5,000 for people 50 and older. Loans are permitted subject to limits and rules, and paperwork may be just a simplified filing IRS Form 5500-EZ when plan assets exceed $ 100,000.
NEVER A BETTER TIME
The new tax law creates a multitude of possibilities with over 60 new provisions to encourage the strong start and financing your small business plan for retirement. Variations in plan design to allow opportunities to respond to independent contractors, the sole-practitioner professionals, small retail owners of virtually all types of small businesses imaginable. Answer the question of IRA vs 401k and you 're on your way.
For small business owners looking for significant tax benefits, it does not get better than that. There has never been a better time than now to convert current taxes into assets, defer tax payments and generate large amounts of retirement income. And to you as a specialist fixed indexed annuity market is virtually untapped.
About the Author:
http://www.Free-Insurance-Leads.com Gary Le Mon is a wholesale distributor of fixed indexed annuities for Allianz, American Equity, Sun Life Financial, and ING. Author and developer of the Safe Money Seminar, a financial planning seminar for Seniors, Gary serves as guest speaker on behalf of agents and agencies nationwide. He is coach, mentor and motivator to over 700 general agents in his insurance marketing organization, InsuranStar Marketing. See also Insurance-Lead-Programs.com
Article Source: ArticlesBase.com – Ira Vs 401k: An Amazingly Simple Small Business Retirement Plan Decision
Part 5 of Solo 401k vs. Self Directed IRA – No Custodian Required