1.
Know your retirement needs.
Retirement is expensive. Experts estimate that you'll need about 70% of your pre-retirement income. Lower earners will need 90% or more to maintain your standard of living when you stop working. Understand your financial future.
2.
Find out about your Social Security benefits.
Social Security pays the average retiree about 40% of pre-retirement earnings. Call the Social Security Administration at 1-800/772-1213 for a free Personal Earnings and Benefit Estimate Statement (PEBES).
3.
If you were not always a
Solo-E, check with your previous employers to see if you have any pension benefits. Also check if previous 401(k) or 403(b) moneys are still being held for you.
If your previous employers offered plans, check to see what your benefits are worth. Most employers will provide an individual benefit statement if you request one. For a free booklet on private pensions, call the U.S. Department of Labor at 202/219-8776.
4.
If you don't have a self-employed tax sheltered account, start one. Encourage your employees to participate too.
If you don't offer a retirement plan, start one. Simplified plans are available to certain categories of employers. For information on simplified employee pensions, order Internal Revenue Service Publication 590 by calling 1-800/829-3676. Retirement plans can help you keep and attract excellent employees.
5.
Contribute the maximum to a tax-sheltered savings plan for self-employed taxpayers.
Check with your tax preparer for more information about tax sheltered program specifically available to self-employed people. You may be able to contribute a substantial amount of money pre-tax to your plan. This can reduce your tax burden and ensure your retirement is well-funded. Over time, deferral of taxes and compounding of interest make a big difference in the amount of money you will accumulate.
6.
Put money into an Individual Retirement Account.
You may be eligible to put $3,000 a year (50 and older can put in $3,500) into a Traditional Individual Retirement Account (IRA) or Roth IRA in addition to self-employed plans. These delays paying taxes on investment earnings until retirement age. Always, check with your accountant for eligibility requirements because if you are not eligible, you may face penalties.
7.
Don't touch your retirement savings.
You'll lose principal and interest, and you may lose tax benefits.
8.
Start now, set goals, and stick to them.
The sooner you start saving, the more time your money has to grow. Devise a plan, stick to it, and set goals for yourself. Start saving now, whatever your age.
9.
Consider basic Investment principles.
How you save can be as important as how much you save. Inflation and the type of investments you make play important roles in how much you'll have saved at retirement. Know how your pension or savings plan is invested. Financial security and knowledge go hand in hand.
10.
Talk to your financial advisor.
Talk to your financial advisor; make them a regular and important part of your team. Be sure the answers make sense to you. Get practical advice and act now.
