What [tax-deferred investing] options do the self-employed have?

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VINNY
Posts: 332
Joined: Wed Mar 28, 2007 9:07 pm

What [tax-deferred investing] options do the self-employed have?

Post by VINNY » Wed Sep 13, 2017 8:56 am

Hi,

I have a friend of mine who is a full-time firefighter for Chicago and operates a side business in which he employees about four people.

I know that he can contribute to the City of Chicago's 457 plan and an individual IRA. In addition to those two investment vehicles, could he set up a 401k for his business so that he and his employees can contribute to that and can he set up a SEP-IRA in addition to the 401k for his business.

I am trying to help him determine ALL of his investment options and the maximum he can contribute to all. Thanks!

pkcrafter
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Re: What [tax-deferred investing] options do the self-employed have?

Post by pkcrafter » Wed Sep 13, 2017 9:40 am

Small business options from Vanguard

https://investor.vanguard.com/what-we-o ... pare-plans

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

Ellie
Posts: 56
Joined: Thu Dec 31, 2015 10:36 am

Re: What [tax-deferred investing] options do the self-employed have?

Post by Ellie » Wed Sep 13, 2017 9:47 am

Yes, he can set up a tax-deferred savings vehicle for his business. Which investment vehicle makes sense for his business depends on the specifics of his situation. There is a lot of information online about the pros and cons of the various plans types, largely from plan sponsors who want to pitch their own plans. The Department of Labor provides its own fairly comprehensive overview, which should be a good place for you to start your research:

https://www.dol.gov/sites/default/files ... siness.pdf.

Also, I recommend this blog post by White Coat Investor that describes, in layman's terms, the contribution rules for individuals who contribute to more than one plan (note what it says about the interactions between 457(b) and 401(k) plans, and the limitation of having only one plan type per controlled business group per year). The post is written for doctors, but the principles apply to all professions.

https://www.whitecoatinvestor.com/multiple-401k-rules/

~Ellie
Best thing that ever happened to me was being too busy in 2008 to pay attention to my portfolio.

VINNY
Posts: 332
Joined: Wed Mar 28, 2007 9:07 pm

Re: What [tax-deferred investing] options do the self-employed have?

Post by VINNY » Wed Sep 13, 2017 9:57 am

Thanks Ellie. I will be checking that out!

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