Retirement Account for Self-Employed

[jesseissorude]

Hey all! 2015 was my first year that I was fully self-employed, and not just doing my business after my normal work hours.

I'm finishing up my personal taxes, and I thought I'd ask you guys what you are doing for retirement investing. I'm so used to a company having a 401(k) that I pay into, and not making any other decisions... I kinda don't know what I'm doing here

It looks like my options are SEP IRA, Individual 401(k), SIMPLE IRA.
I think SIMPLE IRA is out since I don't have any employees.
I also plan to make much more in the future than I made in 2015, so I'd like to pay taxes on my investment now, rather than when I pull it out... so, does the SEP IRA sound like the right idea?

Just wondering what other self-employed people have set up for themselves since this is my first time doing it.

My Goal: I'd like to end up with an account of 3mil so payments out of that can be $150k/yr if the interest rate is a measly 5%. To get there I'd like to add $800-1.4k every month.

Should that account I'm adding to be a retirement account, or should I just stop worrying about that and build up my war chest in a non-retirement account so I can live off of it if I reach my goal before 67?

Bonus question: If you use one, how did you find your financial advisor? (not financial planner)

 

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[Tiger TT]

I think you should read The Millionaire Fastlane again.

Also there's a very good thread going on right now in the INSIDERS
section about investing. You may consider getting an INSIDERS subscription
if you want to learn more about investing.

 

[IGP]

You need to talk to your accountant... The short answer is you can only put $5500 into your IRA account each year.

Now you can have one for you and one for your wife, but individual accounts are capped.

So, you need another non IRA account to dump cash into...

 

[jesseissorude]

Also there's a very good thread going on right now in the INSIDERS
section about investing. You may consider getting an INSIDERS subscription
if you want to learn more about investing.

Thanks for the suggestion. I just signed up and am waiting for approval. I'll check out that thread first thing.

The short answer is you can only put $5500 into your IRA account each year.
...
So, you need another non IRA account to dump cash into...

Yeah that's what I'm wondering about. I obviously need to have a non IRA account if I'm planning to send 1k/mo to it (at least). I guess I should figure out if I need an IRA at all in the first place.

I already have a savings account that I call "War Chest" that I contribute to so I have some money to use when I finally start investing. Is there a point to having a second account that is earmarked for retirement? (I might get my answer when I check that INSIDERS' thread, but I'll ask here as well)

 

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[IGP]

Thanks for the suggestion. I just signed up and am waiting for approval. I'll check out that thread first thing.



Yeah that's what I'm wondering about. I obviously need to have a non IRA account if I'm planning to send 1k/mo to it (at least). I guess I should figure out if I need an IRA at all in the first place.

I already have a savings account that I call "War Chest" that I contribute to so I have some money to use when I finally start investing. Is there a point to having a second account that is earmarked for retirement? (I might get my answer when I check that INSIDERS' thread, but I'll ask here as well)

Yes, because it is tax deferred... Just ask your accountant or look up how IRAs work.

You can do it anyway you want, personally, I have 5 accounts (a personal checking account, a joint checking account with my wife, 1 savings, 1 IRA and 1 investment account for stocks, options, etc.) The IRA and investment account are both with TDAmeritrade.

 

[jesseissorude]

Yes, because it is tax deferred... Just ask your accountant or look up how IRAs work.

You can do it anyway you want, personally, I have 5 accounts (a personal checking account, a joint checking account with my wife, 1 savings, 1 IRA and 1 investment account for stocks, options, etc.) The IRA and investment account are both with TDAmeritrade.

Thanks, this is just the info I'm looking for from folks.

For personal money accounts here's what I do:
-personal checking account
-4 savings accounts (emergency, war chest, stupid tax, and plaything).
-I contribute 10% of all income to War Chest for investing (real estate,
-I contribute $10/mo to Stupid Tax (it's REALLY nice to do some dumb shit like back over a nail and have a Stupid Tax account ready to pay for plugging the tire ).
-If there's a plaything I want to buy, I'll throw spare money in the plaything account (motorcycle parts, fun larger purchases, vacations, etc).

For investing... I have nothing now that I don't have my old company's 401(k). Here's what I *think* the plan is, and what I'd love some feedback on:
-A long-term low fee investment account (index funds, bonds, etc). This is where I'd build that 3mil
-A tax-deferred IRA account that I'd contribute the max to each year.
-A shorter term investment portfolio of real-estate, stocks I hold for 3mo to 5 years, e()

Thank you guys so much for the help I've gotten so far.
It's hard to find info where I normally look, since all the books out there are geared toward slowlaners who need to be convinced to save for retirement, where I'm trying to become an investor down the road. This is the first deeper digging I'm doing and any suggestions for further reading, good places to start, or just telling me how far off the mark I am is always appreciated

 

[CaptainAmerica]

You might want to check out the strategy in Profit First. I run multiple businesses, and this has been by far the best way to keep my finger on the pulse.

 

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[jon.a]

Read "Tax-Free Wealth" by Tom Wheelwright.

 

[Soulrize]

I just set up my mom's ROTH ira and I would highly suggest it being that capital gains inside are not taxed no matter your tax bracket.
contributions capped at 5500 per year however you can invest your money anywhere and with a background I know stocks offer the greatest return . However Im actively watching the market since its my expertise . The best advice I can give if your looking for something to never look at or worry about is the S&P 500 index fund. Its the safest and although the returns won't be 8%+ a year. It will be likely around 6% because of all the baby boomers taking there money out the markets.
Earliest you can take it out at 59 and 1/2, if you wanted you can get a tax free lump sum no problem. which is my mom's preference.