The best retirement plans to grow a nest egg for the future.
Money Girl
311 MG 6 Retirement Accounts You Should Know About (Part 2)
Hey, Fidelity. How can I remember to invest every month? With the Fidelity app, you can choose a schedule and set up recurring investments in stocks and ETFs. Oh, that sounds easier than I thought. You got this. Yeah, I do. Now, where did I put my keys? You will find them. Where you left them. Investing involves risk, including risk of loss. Fidelity brokerage services LLC member NYSE SIPC. When you hear a good idea, it's natural to do a double take. That's what you might do when you hear "discover" will automatically double the cashback you've earned on your credit card at the end of your first year with cashback match. Wait, what? Yeah, double the cashback is something so good you might do a triple take. It pays to discover. See terms at discover.com/creditcard. Hi, everyone. I'm Laura Adams. Thanks for downloading the MoneyGirl podcast. This is the second episode in a two-part series about six different retirement plans created for individuals, employees, and businesses. Back in part one, I covered the first three accounts. So make sure to go back and check out that podcast, which is episode number 310. Today, we'll discuss the remaining three plans that make it easy to set aside money for retirement and slash your tax bill. Before we cover the final three retirement accounts, here's a brief review of the first three types that I already covered in part one. Type one is the traditional IRA. This is a plan for individuals only. Contributions to the account are never taxed until you take withdrawals during retirement. Type two is the Roth IRA. This is also a plan that's only for individuals. Its major difference from a traditional IRA is that contributions are taxed up front. However, withdrawals of contributions and earnings during retirement are tax-free. For 2013, you can contribute a total of $5,500 to a Roth IRA, a traditional IRA, or to a combination of both. Type number three is called a 401(k) plan. This is a pre-tax plan for individuals. However, it can only be established by an employer. Just like with a traditional IRA, your contributions and earnings are never taxed until you take withdrawals during retirement. Now, some employers may also offer a Roth 401(k) option where you make after-tax contributions that grow completely tax-free. For 2013, your total contribution to any type of 401(k) can exceed $17,500 or $23,000 if you're aged 50 or older. That's in addition to any amounts your employer may contribute on your behalf. The last three types of retirement accounts that will cover can be used by businesses or those who are self-employed. Type number four, a solo 401(k). A solo 401(k) is sometimes called a uni-k or a one participant 401(k). It's simply a traditional 401(k) that covers a business owner and their spouse who has no employees, like maybe a freelance writer or photographer. You can make contributions as both an employer and an employee because you wear both hats. On the employee side, you can contribute 100% of earned income from the business up to $17,500 or $23,000 if you're aged 50 or older. And as the business owner or employer, you can also contribute up to 25% of your compensation. However, your total contributions to a solo 401(k) for 2013 generally cannot exceed $51,000. But what if your business is a side hustle, like building websites or teaching music lessons on the weekend and you also participate in a 401(k) at a second company? In that case, the total employee contribution you can make to both plans can't exceed $17,500 or $23,000 if you're age 50 or older. Type number five, a SEP IRA. You may be thinking, well, what if you're a small business with employees? Well, one of the easiest and least expensive retirement plans to administer is the SEP IRA, which stands for Simplified Employee Pension. It's an option for any size business or those who are self-employed. With a SEP IRA, you contribute to a traditional IRA for employees, including yourself, up to 25% of their pay. However, employees can't make their own contributions. Employers can choose the amount to contribute each year, but must give all employees the same percentage. For example, let's say you have a small cleaning business with one employee named Sally. If you choose to contribute 20% of your pay to your SEP IRA, you'd also have to contribute 20% of Sally's pay to her SEP IRA. But if you have a bad year with little profit, you can choose not to make any contributions. This flexibility allows a small business to manage cash flow and have the benefit of a simple retirement plan that requires very little paperwork. Employees are always vested in their SEP IRA account, which means if Sally leaves your employment she can take her retirement money with her. At Sprouts Farmers Market, we're all about fresh, healthy, and delicious. Every shopping trip is an adventure with new and ahead-of-the-trend products hitting our shelves every month. From the latest mouthwatering, vegan, and gluten-free cookies to yummy, plant-based protein bars, there's always something new to explore. Plus, find more than 2800 Sprouts brand items filled with incredible flavor and better-for-you ingredients. Visit your neighborhood Sprouts Farmers Market today where the thrill of discovery awaits. September is a great month for planning. We start thinking about the rest of the year, whether it's back to school, big year-end work projects, holiday plans, or travel. Planning ahead is crucial in life, especially when it comes to what happens when you're gone. Getting life insurance may sound daunting, but policy genius makes the process a breeze. With policy genius, you can find insurance policies that start at just $292 a year for a million dollars of coverage. Some options offer same-day approval and avoid unnecessary medical exams. Policy genius's technology lets you compare quotes from America's top insurers in just a few clicks to find your lowest price. It's the country's leading online insurance marketplace. And if you ever need help or guidance, they have an expert license support team to answer your questions, handle all the paperwork, and advocate for you throughout the process. It's never too late to plan ahead. Go to policygenius.com or click the link in the description to get your free life insurance quotes and see how much you can save. That's policygenius.com. We could try to explain what it feels like to get your work done on a John Deere. The way a Z-Track mower finishes in half the time you thought it would, or how much easier it is to move mountains of soil with a one-series tractor. We could even go into detail about how it feels to tow up to 4,000 pounds behind a Gator SUV. But if you really want to know what it's like to run with us, you just have to get in the seat. Learn more at JohnDeere.com/getintheseat or visit a Deere near you. Type number six is a simple IRA. A simple IRA is another inexpensive retirement account option for any size business with little administrative hassle and paperwork. However, it's generally best for companies with 100 or fewer employees. Simple is actually an acronym for savings incentive match plan for employees. It allows employers to contribute to traditional IRAs. However, it's different from a SEP IRA because employees can also put money in their accounts. Remember, with a SEP IRA, only the employer can make contributions. For 2013, employees can contribute up to $12,000 or $14,500 if you're age 50 or older to a simple IRA. Employers with a simple IRA have two choices for how to make contributions to their employee's accounts. The first is called matching contributions. This means they can match what an employee contributes dollar for dollar up to 3% of compensation. In this scenario, if an employee doesn't contribute to his or her account, then that employee doesn't receive any contributions from the employer. And the second option is called non-elective contributions. This is where an employer can make flat contributions of 2% of pay regardless of how much an employee puts in. In this scenario, an employee who doesn't contribute any amount to their plan will still receive an employer's contribution equal to 2% of salary. Either way, an employee is always 100% invested in all their simple IRA money. The retirement plans that I've covered in this series are the most common, but there are more than six. IRS publication 590, called individual retirement arrangements, gets details about all the plans available for individuals. And IRS publication 560, called retirement plans for small business, can help you explore options for your business endeavor. If you need help setting up a retirement plan or aren't sure how to use multiple retirement plans properly, be sure to contact a qualified tax accountant. Paying a consulting fee to get clarity on these accounts can pay dividends if it saves you taxes and helps you build a cushy retirement account for the future. To get more money tips and advice, check out the Money Girl Facebook page or follow me on Twitter where my username is @laraadams. Also, we publish a free newsletter with extra content that you won't find in the podcast. There are links to everything I've mentioned on the Money Girl page at quickanddirtytips.com. You can even read a transcript of this show, which is episode number 311, called "Six Retirement Accounts You Should Know About Part 2." I'm really glad you're listening to Ching. That's all for now, courtesy of Money Girl, your guide to a richer life. It's Walmart Plus, it's Walmart Plus for your delivery, which saves members time plus money. Yep, plus an included Paramount Plus subscription to stream movies, shows, sports, and that can't miss documentary, plus Burger King savings. That's right, members get 25% off Burger King digital orders every day of the week. Walmart Plus, it's Walmart Plus. Become a member at walmartplus.com, $35 order minimum, Paramount Plus essential plan only, separate registration requirements. Download every participating USBKs and the BKF on bk.com for members only. 25% off one time per calendar day, terms apply. See Walmart Plus, terms, and conditions. Is it time to reimagine your future? The right business skills may make a difference in your career. At Capelli University, we offer a relevant education that's designed to focus on what you need to know in the business world. We'll teach professional skills to help you pursue your goals, like business management, strategic planning, and effective communication. And you can apply these skills right away. A different future is closer than you think, with Capelli University. Learn more at Capella.edu.