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!
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.
