TITLE

Choosing the Right Retirement Plan for a Self-Employed Individual

AUTHOR(S)
Gardner, Randy; Welch, Julie; Grechus, Brooke
PUB. DATE
February 2004
SOURCE
Journal of Financial Planning;Feb2004, Vol. 17 Issue 2, p28
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
This section provides information on three retirement plans which most self-employed individuals choose for their employees: savings incentive match plan for employees (SIMPLE), a simplified employee pension (SEP) plan, or a profit-sharing or Keogh plan in the U.S., as of February 2004. SIMPLE plans are usually set up as individual retirement accounts (IRA), but they may be set up as a 401(k). SIMPLE plans are established with the completion of a Form 5305-SIMPLE that is submitted to a financial institution rather than the Internal Revenue Service. Employer contributions are flexible under a SIMPLE IRA plan. The employer can either: (1) Match dollar for dollar up to three percent of compensation for those employees who made contributions or (2) Choose to make a 2 percent nonelective contribution for each eligible employee, whether or not they make any contributions of their own. Adopting a SEP requires completing Form 5305-SEP and keeping it in the company records. In the SEP, the owner funds his or her own IRA as well as the IRA of all eligible employees on a nondiscriminatory basis. Custom-designed Keogh plans can encourage longevity with a vesting schedule and favor older employees with age-weighting formulas.
ACCESSION #
12246771

 

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