Retirement Plans for the Small Business Owner

small business owner

Want to sell your business for $1billion?

 

At the heart of the small business owner is the hope that someone will come along and buy his business for exactly the right amount of money to retire to the Caribbean.  Just in case that doesn’t pan out, how you will support yourself when your business no longer does?

 

You need to save for retirement.  Every year.  Unglamorous, but your 65-year-old self will thank you.  And, your lower-income-tax-paying self today will be happy, too.

How to do it?

Individual Retirement Account (IRA): 

These can be used by anybody with earned income. The money you put into a Traditional IRA can be deducted from your income taxes if you don’t have access to a workplace retirement plan and fall under certain income thresholds.

 

The growth is tax-deferred, meaning you don’t pay taxes on the earnings of the account until you withdraw at retirement when taxes are owed at the rate of your taxes in retirement.  The maximum amount you can put in each year is $5,500 and you have until April 15th following the tax filing year to contribute.  Anywhere that handles money (your bank, credit union, brokerage company) will open an IRA for you.

 

A variation is the Roth IRA where you contribute up to $5,500/year, but do NOT take a tax deduction for the contribution.  Why bother?  Tax-FREE growth!  When you take the money out at retirement, you don’t owe any taxes withdrawal.

 

SEP IRA: 

This IRA is meant for small businesses. You can deposit 25% of compensation to a max of $54,000 in 2017.  The contribution is deductible from your taxes and the growth is tax-deferred like a Traditional IRA.

 

The catch is that you must put the same percentage of compensation for any eligible employees as you do yourself.   Accounts must be set up and funded by April 15th of the year following the tax year for which you are contributing.

 

Self-Employed 401(k): 

This is account is available only to small business owners who have no employees other than their spouse.  The SE 401(k) allows you to put 100% of compensation up to $18,000 ($24,000 if you are age 50 +) plus 25% of eligible compensation as a profit-sharing match.  The contributions are pre-tax and the growth is tax-deferred.  The maximum dollar amount allowed is $54,000 for 2017.

 

This plan allows those with less net income to put more away than a SEP IRA.  The plan must be established by December 31st of the tax year the contribution is for, but can be funded up until April 15th of the following year.

 

Simple IRA: 

These accounts let businesses with less than 100 employees open a low-cost retirement plan where employees can contribute their own money.  You are required to offer a small match for contributing employees, but it’s not as much as the SEP IRA.  The maximum employee contribution is $12,500 for 2017.

 

Please, do not take this as personal tax advice.  Consult your CPA before deciding which plan is right for you.

 

Kristi’s Quotes: When do you need a financial planner?

Kristi's Quotes

Kristi helps the Financial Planning Association figure out when it’s the right time to hire a professional financial planner.

15 Signs You Need a Financial Planner

 

You wouldn’t depart for an important trip without a clear idea of how to get to your destination — or at least without a GPS or map to show you how to get there. The same logic applies to your journey through life. You’re likely to get lost without a clear financial plan to get where you want to go, now and well into the future.

Financial planning is the process by which a person or family works with a financial professional to set goals, financial and otherwise, and to develop a plan for meeting them. A Certified Financial Planner™ (CFP®) is trained to develop a plan to serve as that map or GPS. And the CFP designation means they must adhere to a code of ethics and a fiduciary standard that require them to put their clients’ best interests first. To find a CFP® in your area, visit the Financial Planning Association’s national database at www.PlannerSearch.org.

Whatever you’re financial circumstances, it’s probably a good idea for you to consider working with a financial planner if…

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Reverse Mortgage – Not a Dirty Phrase Anymore

reverse mortgage

The Reverse Mortgage

 

Chances are high that when I mention the idea of a reverse mortgage to clients, I’ll be met with a very sour expression.  I think this is because of the impression that these instruments are expensive and that you give up ownership of your home to use them.

 

Now, I am NO expert in these products, but for clients who have most of their net worth tied up in their homes, finding a way to use that equity to pay bills is a must.

 

Brainiacs who are way smarter than me have been modelling the use of a reverse mortgage in the overall retirement plan.  The numbers show that using home equity for income, especially when retirement investments are down, can lengthen the time your nest egg will last.

 

What are the benefits?

 

Wade Pfau has been doing research on the use of reverse mortgages in retirement income plans says there are two big benefits:

 

  1. Using reverse mortgage early in retirement can reduce the stress of market volatility on the invested portfolio by allowing people to live off of their home equity rather than selling investments when values are down to pay bills.
  2. The second benefit is that opening a reverse mortgage now (especially with current low interest rates) can allow for the principal that you can borrow against to grow for a longer time.

Who qualifies?

 

Not everyone can get a reverse mortgage.  You must be at least 62 years old, live in an “eligible” home, and there is a limit to how much debt can be against the home.

 

I’m not saying this is for everyone. Reverse mortgages are more expensive than conventional loans and they may tempt you to spend your home equity on dumb stuff instead of using it prudently.  However, if you are feeling your retirement income is too tight and you meet the eligibility requirements, it could be worth investigating.

 

Check out more from Wade Pfau in this Forbes article.  There is also a link to his website at the bottom of the piece.

Kristi’s Quotes: Financial Decoding with U.S. News & World Report

Kristi's Quotes

Do you find it hard to understand financial experts? I don’t blame you! That’s why I helped U.S. News and World Report decode the terms you might hear.

Say what?

 

“Meeting with a financial professional can be key to getting your finances on track. But one thing that doesn’t make it easier: When your financial advisor seems to be speaking an entirely different language.

“Deleverage” … “Fixed income” … “Tax-loss harvesting.” What the heck is your advisor even talking about when he uses these terms? U.S. News tapped certified financial planners to round up their least favorite financial jargon – and to translate what your financial professional is actually saying. Their top 10 peeves are below.”

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A Fun Way to Punish Your Kids!

punished

If you are an active mom on Facebook, this is old news.  If you are like me and employ someone to be active for you on Facebook (I’m talking to you Social Seed Marketing), you won’t have heard of this yet.

 

If your kid gets in trouble, there are fewer ways of dealing with it these days.  Making them go out and cut a switch from the tree so you can use it on them seems to have gone out of favor.  What does that leave?  Making them stay home for some period of time and taking away their screens.  NOW who is getting punished?

 

Now What?

So, someone came up with this genius list to let kids “buy” their way out of being grounded by doing extra chores around the house.  Here is an example, but you would probably need to modify it to fit your family’s needs.  For example, my kids have to mow the lawn, anyway, so it’s not going on the points list.  But, I could add cleaning off my greasy cabinet fronts or wiping down the baseboards.   

 chore chart

 

What does this have to do with financial planning?  It’s a stretch, I admit.  Mostly I just thought is was cool and wanted to share.  Maybe by getting your kids to do more around the house, they will become productive members of society sooner, therefore saving you money when they launch from your payroll at an earlier age.

 

Yeah, good luck with that!

Kristi’s Quotes: Giving the Gift of Financial Well-Being

Financial Planner

This one came out around Christmas from Fox Business, but it’s a concept worth thinking about whenever gift-giving opportunities arise.

 

While it’s long been possible to hand out cash, buy stock or contribute to college savings plans, financial institutions and retailers are making it easier to bestow a gift with lasting value.

Among them is Stockpile, a company that sells gift cards that can be redeemed for stock, which is rolling its products out to more than 14,000 stores this holiday season after seeing success at other retailers. College savings plan administrators, which see contributions peak at the holidays, have been adding new ways to donate. And Gift of College, which helps people to contribute to college savings plans or pay down student loans, began selling gift cards at Toys R Us and Babies R Us nationally this month.

 

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Business Owners – Make More $$ in 2017!

marketing

If you are anything like me, you are still doing your 2017 business planning.  Yes, we were supposed to be good little soldiers and start this back in October of 2016, but that doesn’t make it too late to implement ideas to increase our top-line revenue this year.

 

To help us all out, I enlisted a guest for this week’s blog.  Robyn Frahm from The Social Crew offers these tips:

 

5 Things Your 2017 Marketing Must Have

Before you start panicking about the new year and your marketing plan, we’re here to help you stay organized and guide you through it. We’re The Social Crew, we help small local businesses navigate the stressful (and time consuming) waters of online digital marketing.

Here are 5 “must have” tips for marketing your business this year:

  1. Be mobile friendly: Although most businesses have already jumped on board to this essential digital requirement, there are still some websites out there that aren’t compatible to view on mobile devices such as phones and tablets. If you’ve still got your head in the sand, it’s time to move forward with the rest of the world – 80% of whom are actively searching and shopping online. If your website isn’t mobile friendly, you’ll miss out on business and may as well kiss good-Google-rankings good-bye.
  1. Make a plan: There’s no point saying 2017 is going to be a great year for business when you haven’t put any plans or campaigns together. Set some time aside and have a look at your hits and misses over 2016 and learn from it. Get a plan in place for campaigns and content to stick. You’ll find that you will feel much more in control and organized if you have a structured plan in place for the year. And remember, content DOES matter because search engines look for sites that have regular, and fresh content.
  1. Use Videos: Businesses are getting more used to the idea of video, which means the application will become only more frequent. Video can be used for much more than just content marketing, but also as the front-liner of the brand identity. Especially LIVE VIDEO; it’s an unfiltered, unedited look at the culture of your business and lets customers feel they have an immediate connection.
  1. Hashtags really do work: #Hashtags are an important way to promote your business across social platforms by connecting it to searches and discovery relevant to your target audience. Businesses use #hashtags to attract new customers and grow their online presence. Users searching a #hashtag can come across your account and become new followers or potential customers.
  1. SEO: Our favorite 3 letters, S E O. Search Engine Optimization is a big chunk of the pie when it comes to the success of your website reaching your targeted audience. There is a lot involved in understanding and implementing SEO but it is an essential element that must be used.

If you have questions, we’d love to hear from you at info@socialcrewco.com or call 720-310-5089.

Kristi’s Quotes: Liz Weston Asks about Kids and Money

Financial Planner
Who was interviewed by Liz Weston with the Associated Press? Me, that’s who!

 

Financial planners and credit counselors see plenty of examples. The grown son who lost a job, moved home and stopped looking for work. The daughter who constantly mismanaged her checking account — and turned to payday lenders when parents stopped covering her overdrafts. The father working into his 70s to support spendthrift children in their 40s and 50s.

Kristi Sullivan, a certified financial planner in Denver, once worked with an elderly couple whose offspring constantly turned to them for help.

“The clients couldn’t understand why their grandchildren had all the latest iPads and phones, but when a car or home repair came up, their adult children always had to ask them for money,” Sullivan said….

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Love and Money – What Can Possibly Go Wrong?

love and money

Counseling Center of Cherry CreekThis week, I am thrilled to get the expertise of Jenny Glick to talk about love and money.  Jenny Glick, MA, MSC, LMFT is a licensed marriage and family therapist, sex therapist and owner of the Counseling Center of Cherry Creek. She and her team of therapists focus on working with couples and individuals looking to improve the relationships in their lives. Visit the team at www.CounselingCenterofCherryCreek.com.

 

With Valentine’s Day upon us, many couples feel pressure to show love by purchasing gifts.  What is a better alternative to showing your love to your partner?

I often to say couples that the definition of love is to “attend to.”  We love our children so we attend to their various needs — whether that is health, education, or sports activities. We love the idea of retiring so we attend to our retirement accounts on a regular basis by investing a limit bit regularly over a long period of time. Similarly, with one’s spouse simply paying attention and investing on a regular basis goes a very long way.

 

I cannot tell you how many times I’ve sat in a room with a couple and the wife says that she has felt ignored by her spouse and all that she wants is for her husband to notice her or help with the dishes. The husband (as cliche as it may sound) will often say in earnest, “I know that I have heard you say that before but I didn’t really know what you meant.”

 

And truly…he didn’t know what she meant because he was not attending to her…really paying attention to her needs.  Practice listening to your partner and really hearing how you can attend to him or her better.

 

When couples argue about money, what is commonly at the root of that fight?

When couples argue about money it is usually because they have not mastered an important developmental skill in marriage called differentiation. Simply put: differentiating is tolerating (and even supporting) your partner’s difference.

 

She wants A. He wants B.  She tries to get him to see how B is wrong and A is better.  He feels hurt and angry and she is criticizing B (and hence criticizing him) and puts down A.  She feels unsupported (“like always!”).  He feels rejected (“just like in the bedroom!”).  You may be familiar with how this ends.

 

Rarely is a money argument about money. You and your partner need to level up your skills to learn to be curious about your different rather than attack your differences.

 

What are some tips for couples looking to engage in a therapist?  What should they be looking for? 

 

First and foremost, always ask your potential therapist what percentage of their clientele are couples. Those of us who specialize in this work see at least 60% couples. That means that we have lots of experience and training in helping couples with things like communication, intimacy, and co-parenting.

 

Secondly, it is important to find someone who gets you — someone who speaks your language. Every therapist is different and personality matters so take the time to shop around and find a strong match. You are investing in one of the most important relationships of your life…your marriage!

 

Thanks to Jenny for this fabulous insight!  Here’s hoping your Valentine’s day is one of attending to your relationships, not adding to your credit card balance.

Kristi’s Quotes: Investing Tips from the Experts

Financial Planner
The editorial team at ETF Reference surveyed 57 ETF investing experts in search of the best tips for exchange-traded fund investors. The response we received was incredible. Our panel sent us hundreds of amazing tips! We winnowed that list down to101, which are presented below.

 

We asked our panel, “What is the one piece of advice you’d give to an investor just starting to build a long-term portfolio?”

 

 

Click here to find out what Kristi and dozens of others advise!

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