Costas wrote:
- quote -

Just saves a step - an easy one. Either way you need to open the IRA
account itself to receive contributions. With the SEP you also need to
sign a form establishing your "plan" and stick it in a file and remember
to amend it if things change (e.g. employees). Also: if you were married
the SEP could affect the deductibility of your spouse's trad-IRA
contributions (see IRS publication 590 for the chart).


- quote -

Not change the SEP, but change which one you use (the Roth IRA is a
different type of account). Extreme example: this week, if you were
still on an extension for 2006, you could open and fund a SEP-IRA for
your business for 2006, terminate it for the 2007 tax year and establish
a solo-401k for 2007, then terminate that in 2008 and do something else.

- quote -

Well I'm in that business and I'd say, do it yourself if you have the
time, hire someone if it's not worth your time. This isn't rocket
science but it does take time to figure out.

The last Q could be the easiest...many self-directed investors use
Vanguard or Fidelity for their no-load funds. If your contributions are
small at this point, a fund-of-funds (eg Vanguard's Lifestrategy series)
is an easy way to do it. No need to plot a 30-year investment strategy
if you have $5k to sock away.

-Tad

Thumper wrote:

- quote -

Until and unless one converts it to a Roth IRA, in which case those
(converted)funds are longer called SEP.

JOE

www.blog.joetaxpayer.com

On Tue, 9 Oct 2007 04:03:59 -0500, Costas <digitalcostas[at]gmail.comwrote:

- quote -

I believe that once a SEP always A SEP. You can stop contributing to
it and start a traditional. The main reason I started a SEP is that I
had maxed out my traditional IRA and this allowed me to put more away
with hardly any cost or paperwork.
Thumper
- quote -

Costas <digitalcostas[at]gmail.com> writes:

- quote -

You can have both, you know.

As a self-employed person you can make the 20% of net profits
contribution to the SEP-IRA *and* make an annual $4000/$5000
contribution to a "normal" traditional IRA as well.

--
Rich Carreiro rlc-news[at]rlcarr.com

Costas <digitalcostas[at]gmail.com> writes:

- quote -

Your accountant should be able to help you figure out what's up.
Do make sure you read that Morningstar article I mentioned last
time. It's the most concise overview of the various kinds
of accounts for the self-employed that I've seen.

- quote -

We've been very happy opening and managing a variety of
SEP, Roth, Traditional, even defined-benefit plans - for
very small business and one-person self employed - at both
Fidelity and Vanguard. Great funds available in both places,
very low costs, easy access/management, and folks to talk
to on the phone. There are certainly other options, but
actual real-life experience with both of them - recently -
has been very good.


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In article <1191890406.623920.212190[at]g4g2000hsf.googlegroups.com> ,
Costas <digitalcostas[at]gmail.com> wrote:

- quote -

The traditional might be the way to go if the business was a one-time
only thing, you were very short on cash, you needed the tax
deduction badly, and you didn't want to bother to do the SEP
paperwork. Another case is where the business shows a loss,
but you have other W-2 income.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

I appreciate everybody's input. This is more helpful than 1 week of
google searches!


- quote -

So what would be a compelling reason to go traditional over SEP? So
far SEP sounds exactly the same only allowing me to contribute much
more.

I hear what some have said about taking on employees in the future, or
changing business entities as my business evolves. So could I open a
SEP for now and change it later (to a traditional/Roth) if it makes
more sense?

This is really my first educational experience with this stuff. I've
never spoken with a professional (CFP) because I'm thinking they will
give me biased advice.

What's your opinion: Should I seek professional assistance to help me
sort through these things or will I do OK "going nuts" with research
for another month or so?

What companies do you all recommend for starting SEP's or IRA's? I
have a savings with ING and they offer IRA's (but no SEPS).

Thanks - I appreciate you guys!

John A. Weeks III wrote:

- quote -

So if he started with a self-employed 401(k) but then hired someone,
couldn't he then leave the 401(k0 to grow but with no further deposits,
and open a different plan suitable for a business with employees?
Anyone else in favor of a retirement system that has fewer rules


and
can be understood by more than a handful of people?
JOE

In article <de3lg3980rgtmap2hj1802npphjh4o2s6r[at]4ax.com> ,
Thumper <jaylsmith[at]comcast.net> wrote:

- quote -

Good point. Also, there is no telling from the posting that sole
proprietorship is the best form of business, or that the business
will stay small. I'd hate to see the OP make a decision based on
one year, and have that be a bad decision for the next 10. When
you consider the long time horizon, there is so much money at
stake here, potentially millions, that the OP really does want
to engage some professionals to help him out.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

On Mon, 8 Oct 2007 13:27:51 -0500, Tad Borek <borekfm[at]pacbell.netwrote:

- quote -


Of course one problem is that if you ever do get an employee, you must
contribute as much to the plan for them as you do for yourself in any
given year.
Thumper

Rich Carreiro wrote:
- quote -

The way the original question was worded, I thought John's answer made
perfect sense. He pointed out this is not an apple to apple comparison.

I'd look at:
http://personal.fidelity.com/product...sr?refpr=sb003
for a comparison of the employer type plans (i.e. page does not discuss
regular IRA or Roth IRA which have a $4000/yr cap on contributions.)

Without knowing more about the OP, (he's 27, sole proprietor, no
employees) I'd think the self-employed 401(k) has some great advantages.
If he is in the 15% bracket, I might recommend a Roth flavor of
savings, but 25% or higher, and the pre-tax deposit is still appealing
to me. I am working on an article which has a major point that it would
take over $2M right now, current tax laws and tax rate schedule, to have
an annual withdrawal at the top of the 15% bracket, still not 25%. I
think that if one has any years of low income, due to unemployment,
health, etc., that's a great time to convert to a Roth.
Even if tax rates rise (I know that's the risk) there needs to be some
amount that will be subject to these lower rates, it's the higher end
that's at greater risk.
JOE

Costas wrote:
- quote -

I'll try to summarize, it's a big topic.

As a sole-proprietor you can set up what amounts to an "employer"
retirement plan. It's a bit of a fiction because you are really both the
employer and employee, but it lets you tap into some good alternatives -
meaning, you can set aside quite a bit of your money in a tax-deferred
account.

A SEP-IRA is one of those. You're able to defer, in effect, up to 20% of
your sole-pro net income into an IRA. You won't pay income taxes on any
amount you defer. The money can be invested in a wide range of
investments -- mutual funds, stocks, bonds, depends on where you open
the account -- and isn't taxed until you take it out at retirement. If
you take it out earlier, you're hit with taxes as well as
early-distribution penalties. But let's say you make $50k...you could
set aside $10k of it (not exactly, see the worksheets for the exact
calculation).

These days many are using "solo-k" plans instead of SEPs -- 401(k) plans
with only one owner/participant. The advantage is that you can defer a
flat $15,000 in addition to the 20% "employer" contribution. These used
to be very expensive but in the past few years they got a lot cheaper or
even "free", though you may have fewer investment alternatives.

You'll find some other alternatives out there, unfortunately "employer
based" retirement plans are governed by a patchwork of tax laws so it's
a bit confusing.

Now forget all that for a moment...any individual with earned income can
put money into an IRA, which is a tax-deferred account for retirement
savings. The annual contribution limit is currently $4,000 so it's not
as good as the employer-based alternatives. You have two basic
alternatives, a Traditional IRA and a Roth IRA. See the MIFP FAQs for a
discussion of the differences.
http://financial-planning.algebra.co...s_and_Planning

Which to do depends on your current tax rate and how much you want to
defer for retirement. You could do a combination of SEP-IRA or 401(k)
plus a Roth IRA (if you qualify), or only one of these. Or if you only
want to defer $4k or less, the Trad-IRA is a simple way to do it.

-Tad

"John A. Weeks III" <john[at]johnweeks.com> writes:

- quote -

Here's a pretty nice article about the various types
of retirement savings plans for the self-employed:

http://news.morningstar.com/articlen...aspx?is=208473
(by Sue Stevens, entitled "Retirement Savings for the
Self Employed" and posted in 9/27/07)

As John said, "SEP" and "Roth" are orthogonal issues -
it's "Individual" versus "SEP" and "traditional" vs. "Roth".

You can, in fact, make *both* SEP and Roth IRA contributions
in a given year, though, of course, they have to be
separate accounts. see
http://www.irs.gov/faqs/faq17-3.html
(which, of course, points to the standard reference on
personal IRAs, the IRS Publication 590 which is actually
quite readable and worth looking at, and 560 which is
where SEP-IRAs are discussed)


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Costas <digitalcostas[at]gmail.com> writes:

- quote -

I'm not sure what John means -- to the best of my knowlege SEP-IRAs
are taxed exactly like traditional IRAs (except for different
*contribution* rules).

Thus they differ from Roth IRAs pretty much exactly how traditional
IRAs differ from Roth IRAs.

--
Rich Carreiro rlc-news[at]rlcarr.com

Hi John,

- quote -

Can you tell me anything about how the SEP is taxed? Or what
"features" specifically are different from a ROTH?

THanks,

-Costas

In article <1191793101.743775.206530[at]v3g2000hsg.googlegroups.com> ,
Costas <digitalcostas[at]gmail.com> wrote:

- quote -

A SEP is a company plan. It defines what the owner can put
in, and what the owner has to put in for employees. A Roth
is a personal plan. It is like a traditional IRA, except
in the way it is taxed. You should look at a company plan
first, then a personal plan. The SEP is nice in that the
contribution limits are higher than personal plans. There
are a number of other plans out there, too, such as the
Simple, Keogh, 401K, 403B, etc. You may want to talk to
both a financial planner and a tax attorney, and then decide
exactly how to structure your business to take maximum advantage.
Put another way, this is simply too good of a tax break to
miss out on.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

First some background: I am a 27 year old sole proprietor of my own
business. I have no employees.

So I'm trying to research retirement options and kind of stuck between
SEP and ROTH IRA's.

My understanding of a Roth: You pay taxes when you put money in. When
you retire you do not have to pay taxes on anything.

How is a SEP different? I've read that you're allowed to contribute
more into SEP than Roth. Is there any other difference?

Thanks!