| "Hello, I'm from the government. I'm here to help you." Ordinarily, these words have a chilling effect on the self-employed, knowing as we do just how ironic they can be. However, every once in a while they are true and advantageous. This is the case with the tax-deferred pension options the U.S. government makes available to the self-employed, people like you and me. 1) Do YOU have a pension plan? It's crazy not to! The sad fact is, a MAJORITY of the self- employed don't have a pension plan. Survey after survey documents the fact that millions of people -- each of whom wants to get old (it beats the alternative) -- are NOT using their business and the pension guidelines to arrange for a comfortable retirement. This is madness. Don't wait another minute to do the necessary. Call your accountant today and listen carefully as he presents your pension options. Make sure you take notes and question him liberally until you really understand what you can do. 2) Be clear on how much you can invest in your tax-deferred pension account. Your accountant should give you a precise figure to invest. Keep it close at hand. Knowing this figure, and doing what's necessary to achieve it are both crucial to your long-term comfort and security. 3) Know the next pension deposit deadline. Ideally, you should deposit the full pension amount at the time you file your federal taxes. If not, your accountant should give you the date (generally six months after you've paid your taxes) that you can still pay into your pension plan. This date is VERY important 4) Once you know the figure you can deposit into your pension plan, make achieving it your #1 goal. Say you are authorized to deposit $5,000 into your tax-deferred plan. Say you have until September 1 to do so. First, you want to deposit this amount in your pension plan just as early as possible. Today if possible. Why? Because you want to put time to work for you. All things being equal, it's better to make your pension payment on April 15 rather than September 15. It gives the funds just that much longer to grow. This makes a great difference over time. 5) Treat your pension payments like a bill, your #1 bill. Most people pay into their pension accounts after they've paid all their other bills, when there may or may not be anything left. This is a mistake. If you are unable to pay-off your pension balance at tax filing time and must make (say) monthly payments, then ensure you make these payments the very first thing each month, before you've depleted your available cash. 6) Cash windfall? Think pension! Made a big sale? Had a bit of luck? Got some extra cash? Think PENSION! Remember, deposit into your tax-deferred pension account as SOON as you can, and if a bit of extra cash comes your way pay off what you "owe" your pension account. 7) Pay your pension fund in advance whenever possible. Had a good year? Made some extra money? Already paid the maximum into your pension account? Then deposit some more! The future is, by definition, murky and uncertain. That's why if you can deposit more, you should. Take any extra funds you can spare and make an early deposit into your pension fund. When a rainy day comes, you'll be glad you did! 8) Look but don't touch! When that rainy day comes and you need extra cash, you may think longingly about the funds in your tax-deferred pension account. DON'T! You must regard your pension funds as sacrosanct, not to be touched until commanded to do so by the federal regulations governing access and withdrawal. If you withdraw them now, you will ordinarily pay a hefty penalty. What's more you lose the benefits of time... and jeopardize the comfort and security of your golden years. Find another way to get the funds you need. Don't dip into this till. Conclusion We all hope to get old, but to get old without security and comfort is to be in a most unenviable situation. Use your business -- and the tax-deferred pension options provided by government --, to ensure your old age is as ample as you deserve and desire. |
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