NAFEP Self Directed IRA Blog

Many small businesses want to provide good benefits for their employees.  Each business has there own reasons for giving benefits.  One might be that there are great tax benefits in doing so.

The tax benefit is that it postpones paying tax dollars.  The decision for the business is to keep the profits through giving it to the employees or give them to the government in taxes.  There are several other benefits for self-employed individuals to save for retirement through the Economic Growth and Tax Relief Reconciliation Act from 2001.

There are several retirement plans for small businesses to choose from.  The most common and popular is the self directed IRA and the 401K.  Choosing between these two might be a tough decision.

A self directed IRA has so many benefits. It is very easy to set up and manage.  The largest benefit with this IRA is that it gives the investor the control over the account.

The investor gets to choose what to invest in and that can give a diverse portfolio.  Diverse portfolios are often more successful that strict ones.  Investors also have the help of a custodian to aid them in their managing of the self directed IRA.

The business can use the contributions to the IRA as a business expense.  The profits made within the IRA are not taxed until they are withdrawn.  There are limits to the amount of the contributions that can be made, so employees and employers should be aware of the amounts.

The other option is the Individual or Solo 401K.  This option is best for a business that only has owners and no other employees.  The largest benefit with this retirement account is that the amount limit of contribution is larger.

There is a limit on the employer contribution amount in a 401K that can be tax deducted.  The limit is 25% of the gross eligible payroll.  There is an allowance of a “catch-up”  amount of $5,000 for individuals 50 years old and over.

Tags: self directed ira, Self Directed Retirement

This entry was posted on Thursday, July 29th, 2010 at 7:50 am and is filed under self directed ira. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.