Featured: You, Too, Can Have A Retirement Plan
Member News
Tuesday, July 24 2012 00:00

In a new series of "unique to the web" articles, the Butler County Chamber of Commerce website will feature stories highlighting issues of interest to the local businesses community.

By Howie Pentony, Pentony Capital Management

Today there are incredible Retirement Account choices for not only individuals but institutions and corporations. If you want to have a retirement plan you can have one. It is wonderful if your company or institution sponsors a plan. If they don’t you can still, under most circumstances, contribute up to $6000 a year pre-tax to your plan. If you have a small business retirement plans are most likely available that have no administration obligations. What that means is that most of these small plans have no filing fees or costs. You are going to pay someone to funnel the money into the plans but other than that you, as the business owner, will not be paying huge plan costs. This is good.

Let’s talk a little about these plans as of the 2011 tax year. Most of us know about conventional Individual Retirement Accounts commonly known as IRAs. Most people can contribute $5000 per year pre-tax. If you are 50 years of age or older the number is $6000. A non working spouse also qualifies so the two of you could, if you are 50 or older, contribute $12,000 a year. Not a small sum. If you do not want to pay taxes on withdrawals down the road you can, under most circumstances, contribute the same $12,000 to Roth IRAs which allow tax-free withdrawals later but there are no deductions or pre-tax contributions to benefit you now. So, even if you are young and your company has no plan, you and your non-working spouse can put $10,000 a year into a retirement account. It is not one account; it is $5000 in each account. If you can afford it, key words “can afford”, you do have choices. There are Modified Adjusted Gross Income limits but most of us do not fall into that category.

Two plans favored by small businesses include SEP IRAs and Simple IRAs. Simple IRAs require some matching from the Employer. SEP IRAs are for any employer and SIMPLE IRAs are for companies with 100 or less employees. The advantage of these plans is that the maximum contributions are thousands of dollars higher, up to $49,000 or 25% of compensation. And again, there are no administrative costs for the companies except some small internal costs. If you are a one or two person company, you can possibly put away a lot of money.

The popular 401(k) plans are most familiar to many of us. Generally employees can put away $16,500 a year or $22,000 if you are 50 and above. There are even individual 401(k) plans. Sometimes companies match some of your contributions which is a great advantage for you. Let’s say you can only afford to put in 10% of your compensation but your company matches the first three. That means the number is now 13% of your compensation. Again there are maximums here but most of us would not be affected.

There are also MPP plans, money purchase pension plans, which were popular in years gone by but most companies have found them to be too expensive to maintain. When you start guaranteeing your employees a certain pension benefit it can be very expensive as companies and governments are finding out. There are some PSP plans, Profit Sharing, but consider yourself fortunate, under most circumstances, if you work for a company that has this plan.

There are 403(b) plans for organizations, churches and educational institutions. These also can have much higher contribution limits but there are guidelines. There are others but these will suffice for our examples.

I have not covered each and every rule and reg out there on any of these plans and some may be different for the 2012 tax year. What I hope to accomplish here, whether you are a company, individual or organization, is to get you to start thinking. If you don’t have a plan for yourself, why not? If you are a company and do not have a plan, which helps to retain employees by the way, then why not? Contact a professional who knows about these plans. They will be happy to help you figure out what is right for your circumstances.

I don’t know about you but in the future, especially for the younger people out there, I doubt that our government is going to take a more active role in funding our retirement. I think it might be a lot less. If you agree, start saving. I’ve actually enjoyed doing it, and I think you will too.

Howie Pentony is a client portfolio manager with Pentony Capital Management, 103 Pittsburgh Street in Saxonburg, PA.

Securities and Advisory services offered through Commonwealth Financial Network
Member www.FINRA.org / www.SIPC.org, a Registered Investment Advisor

This communication is strictly intended for individuals residing in the states of AZ, CA, FL, IN, MI, NC, OH, PA, SC, UT and WV. Offers may be made or accepted from any resident outside these states due to various state requirements and registration requirements regarding investment products and services.

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