Women Business Owners: Don't Forget About Your Retirement Plan

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American Business Women's Day is celebrated on Sept. 22. And there is indeed cause for celebration, because, in recent decades, the number of women business owners has risen sharply, to the point where nearly 40 percent of all businesses are now women-owned, according to the U.S. Census Bureau.

If you are one of these owners, or thinking about becoming one, you'll always have a lot to think about when running your business, but there's also an area you can't ignore – your retirement. Specifically, you need to consider establishing your own retirement plan.

Most plans available to you are fairly easy to establish and maintain, and are not terribly costly to administer. Here are some popular options:

* Owner-only 401(k):
This plan, also known as an individual or solo 401(k), is available to self-employed individuals and business owners with no full-time employees other than themselves or a spouse. For 2018, you can put in up to 25 percent of your annual income as an "employer" contribution, and you can defer up to $18,500 (or $24,500 if you're 50 or older). The sum of your employer contribution and your salary deferrals cannot exceed $55,000, or $61,000 if you're 50 or older. You can make elective contributions on a pre- or post-tax (Roth) basis. Pre-tax contributions reduce your taxable income for the current year. Roth contributions don't offer any immediate tax benefit, but any qualified withdrawals will be 100 percent tax-free.


* SEP IRA: If you have just a few employees or are self-employed with no employees, you may want to consider a SEP IRA. You will fund the plan with tax-deductible contributions, and you must cover all eligible employees. As an employer, you can contribute the lesser of 25 percent of your compensation (if you’re also an employee of your own business) or $55,000.

* Solo defined benefit plan: Pension plans, also known as defined benefit plans, are less common than in previous years, but you can still set one up for yourself if you're self-employed or own your own business. This plan has high contribution limits, which are determined by an actuarial calculation, and your contributions are typically tax-deductible.

* Simple IRA: A Simple IRA, as its name suggests, is easy to set up and maintain, and it can be a good plan if your business has fewer than 10 employees. However, while a Simple IRA may be advantageous for your employees, it's less generous to you, as far as allowable contributions go, than an owner-only 401(k), a SEP IRA or a defined benefit plan. For 2018, your annual contributions are generally limited to $12,500, or $15,500 if you’re 50 or older by the end of the year. You can also make a matching contribution of up to 3 percent of your compensation. As an employer, your contributions are fully deductible as a business expense up to certain limits; as an employee, your pretax contributions reduce the amount of your taxable income for the same tax year.

Before opening any of these plans, you'll want to consult with a tax professional on the tax issues and a financial professional on the investment aspects. But don't wait too long. You will need to work hard to keep your business thriving – so choose a retirement plan that works just as hard for you.

This article was written by Edward Jones for use by your local Edward Jones financial advisor. Courtesy of Rob Adams, 71 Main Street, North Adams, MA 01247, 413-664-9253.. Edward Jones, its employees and financial advisors cannot provide tax or legal advice. You should consult your attorney or qualified tax advisor regarding your situation. For more information, see EdwardJones.com.

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Smart Financial Moves for 'Gig' Economy Workers

Submitted by Edward Jones

Not that long ago, most people worked for some type of an organization, such as a business or the government or a school district. But today, more and more workers are going their own way and joining what's known as the "gig" economy. If you will be one of them, you'll want to make the right moves to advance your financial goals in what can be a challenging work environment.

But first, you may find some comfort in knowing the prevalence of gig work. About 36 percent of U.S. workers are now gig workers, according to a study from the Gallup organization, which defines the gig economy as one made up of a variety of arrangements – independent contractors, online platform workers, contract workers, on-call workers, temporary workers and freelancers. People join the gig economy for many reasons, but most of them, like you, could benefit by considering these actions:

Establish your own retirement plan. When you're a full-time employee, your employer may offer a 401(k) or similar retirement plan. But as a gig worker, you need to save for your own retirement. Fortunately, you've got a lot of attractive options. Depending on your circumstances, you might be able to open a SEP-IRA or even a "solo" or "owner-only" 401(k), which offers many of the same features of an employer-sponsored 401(k). Both these plans allow you to make pre-tax contributions, which can lower your taxable income. Plus, your earnings can grow on a tax-deferred basis. (Keep in mind that taxes will be due upon withdrawal, and any withdrawals you make before you turn 59 1/2 may be subject to a 10 percent IRS penalty.)

Create an emergency fund. Working in the gig economy can bring rewards and risks. And one of those risks is unpredictable – and often uneven – cash flow. This can be a cause for concern during times when you face a large unexpected expense, such as a major car repair or medical bill. To avoid dipping in to your long-term investments to pay for these costs, you should establish an emergency fund containing at least six months' worth of living expenses, with the money kept in a liquid, low-risk account.

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