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Should You Choose Riders on Your Long-Term Care Insurance Policy?

Thinking of buying long-term care insurance? That could be a smart decision. Long-term care is likely to be a reality for many retirees. The U.S. Department of Health and Human Services estimates that 70 percent of today’s 65-year-olds will need long-term care at some point in their lives.1

Long-term care could deplete your retirement assets. Many people need long-term care for several years. While care can be provided either in a facility or in the home, both types usually cost thousands of dollars per month. That type of cost can quickly add up.

Long-term care insurance can help cover some or all of the cost, depending on your type of policy. You pay premiums today in exchange for protection in the future. Not all policies are the same, though. There are many different types, and each has its own set of costs and benefits.

Many policies also offer optional riders. These are benefits you can add to your policy for an extra charge. The extra benefits may provide unique protection or fill a specific need. Below are three of the most commonly used riders. Before you buy your policy, consider your needs and which riders may best help you meet your objectives.


Spousal Benefit


If you’re married, a spousal benefit rider could be an important feature. Most long-term care policies have lifetime caps on coverage. These are sometimes expressed as a benefit dollar amount, but other policies have a maximum number of months they will cover.

The spousal benefit combines the maximums of each spouse into one pool. That way, either spouse can use the benefit as needed. Some policies will even increase the maximum coverage to accommodate both people. This benefit can increase the cost of the policy, but it can also provide a valuable level of protection.


Return of Premium


One of the biggest concerns many people have about long-term care insurance is the risk that the policy will never be used. Of course, not using the policy means you didn’t need long-term care, so that’s not necessarily a bad thing. However, you may not feel great about paying premiums for years only to never put the policy to use.

Some policies offer return-of-premium riders. These riders vary by policy, but they essentially return a portion of your unused coverage to your beneficiaries upon your death. Some companies will package this benefit as a life insurance hybrid. These riders are appealing, especially for those who want to leave a legacy. However, the rider can also significantly increase the cost of the policy.

Inflation Protection


This may be one of the most important riders available. Health care costs are rising all the time. Long-term care costs are no exception. It’s possible that you could buy your policy and then not use it for years. Costs could rise over that time, reducing the impact of your coverage. Inflation protection riders increase your benefit each year to keep up with rising costs. The rider may increase your premium, but it may be worth the extra cost.

Ready to find the right long-term care plan for your needs? Let’s talk about it. Contact us today at Retirement Peace Project. We can help you develop the right strategy for your goals and your budget. Let’s connect soon and start the conversation.




Digital Assets and Estate Planning: 3 Tips to Protect Yourself

Estate planning should be a component of any financial plan. The term generally refers to the distribution and management of one’s assets after a person passes away. While it may not be pleasant to think about your death, it’s an important exercise. You can create a lasting legacy and eliminate needless stress for your loved ones by developing a strategy. Estate plans usually include a will, trust and other planning documents.

Estate planning isn’t just for financial assets, though. You also may want to include guidance and instructions for your digital assets. For example, your email could contain important or sensitive information. Perhaps you have privacy concerns with your social media accounts. Maybe you have photos on a cloud server that would hold sentimental value for your family. You may even have online investment accounts or income streams that your loved ones may need to access.

While the world may have gone digital, much of estate planning law isn’t quite there yet. There aren’t many laws that govern how digital assets and accounts should be handled after someone passes away. While a will, trust and other tools are accepted as legal documents to manage financial assets, it’s unclear how these documents can be used with regard to digital accounts. Below are a few tips on how to navigate the digital afterlife:


Decide on your objectives for your accounts.


It’s always helpful to clarify your wishes and objectives before you take action. Start by listing your important accounts, such as email, social media, photo and file storage, and more. Then think about what should happen to each account after your death.

Would anyone need access to the account for any reason? Would your family need to search your emails or perhaps access a financial account? Are there any assets like photos or messages that hold sentimental value?

Privacy should also be a concern. Is there anything in your email or social media accounts that you wouldn’t want your family members to see? There may be certain information or communications that you don’t want to share with your children or other loved ones.


Research how various platforms handle inactive accounts.


Most digital companies have policies in place on how they handle accounts for deceased customers. Some are very strict and won’t allow access to anyone else without some kind of court order. Others will allow another person to access the account if it’s been inactive for a prolonged period. Some social media companies will keep your page up as a “remembrance page” with limited access to others.

Do some research to see how your primary account platforms operate after a user’s death. They may allow you to designate a backup person to take over your account or access certain information. If they don’t allow that option, you may need to consider alternative strategies.


Create written instructions for your heirs and loved ones.


Theoretically, you could include account management instructions, usernames and passwords in your will or other documents. That may not be a great idea, however, as those documents are often filed as public record. That means anyone could gain access to your accounts.

Instead, consider using a password management tool to store login info, and then simply have your estate executor provide that info to the appropriate person. You could also store a document with digital asset instructions along with your other important documents, such as your insurance policy, will and others.

Ready to review your estate planning strategy? Let’s talk about it. Contact us today at Retirement Peace Project. We can help you analyze your objectives and all your assets, and then develop a plan. Let’s connect soon and start the conversation.

Business Owners: Avoid These 3 Estate Planning Mistakes

Every business owner has to make an exit at some point. Some owners leave on their own terms, either through retirement or with the sale of the company. Others, though, exit before they’re ready via disability, health issues or even death. While it may not be pleasant to think about the latter category of exits, it’s important to consider what may happen to your business and your family if you pass away.

Estate planning can sometimes be a complicated process, but it can be even more complex if you’re a business owner. You have to consider how to compensate your family for your years of investment and hard work. You also may have business partners to think about. And you probably want to create a smooth transition for your employees, customers and other interested parties.

Fortunately, with some discipline and proactive planning, you can create a strategy that meets your goals and protects your family and business. Below are a few common mistakes that business owners make when planning their estate. If you can avoid these, you’ll have a good head start on protecting your legacy.

Not planning for probate.

Probate is the legal process of settling an estate. After a person passes away, his or her estate flows through the local probate court. During this process, the court and the estate executor settle all outstanding debts, file and pay final taxes, liquidate assets, notify heirs and handle countless other tasks. As you might imagine, probate can be time-consuming and can generate substantial costs.

Some assets are exempt from probate, but only if they are titled correctly. For example, IRAs, life insurance, annuities and even trusts are exempt from probate because they have beneficiary designations.

Without proper planning, however, your business may have to go through the probate process. That could leave ownership unsettled for months or even years. The court may decide who inherits your business, and it could choose someone you wouldn’t have selected. The legal and administrative fees could also drain your estate assets. You can avoid all this by working with an estate planning professional to develop a strategy.

Not having a buy-sell agreement with your partners.

You may have a co-owner or partners who have helped you finance and build your business. In fact, it may make the most sense for your partners to take over your share of the business after you pass away. After all, they understand the company and have been intimately involved in its growth.

However, that doesn’t mean you should simply leave your share to your partners. You’ll want your spouse, kids and other loved ones to be compensated for your hard work. If you leave your share to your partner, he or she may have no legal obligation to pay your family for your investment.

Instead, work with a professional to establish a buy-sell agreement. This tool governs how your share is transferred and how your family is compensated. These agreements are often funded with life insurance, so you can rest easy that your family will enjoy the fruits of your hard work.

Not choosing a successor in advance.

If you’re like a lot of business owners, you want your legacy to last well into the future. Even after you’re gone, you may want your business to continue providing for your children and grandchildren. And you likely want your company to continue to serve your customers.

For business owners, estate planning isn’t just about handling the financial transition of the company. It’s also about putting the right successor owner in place to lead the company for years to come.

Take time now to think about who the next owner should be. Should it be a child or other family member? What about a key employee? Maybe a competitor or vendor would be best to take over the business?

The earlier you think about these questions, the sooner you can develop and implement a transition plan. It might take years for you to train the next owner. It’s better to start that process sooner rather than later.


Ready to develop your estate plan? Let’s talk about it. Contact us today at Retirement Peace Project. We can help you analyze your needs and goals, and then develop a strategy. Let’s connect soon and start the conversation.

Have You and Your Spouse Discussed These Questions?

Retirement is a happy milestone, but it can also be a transition that brings difficult issues and challenges. Those challenges can spur tough conversations, especially between spouses. One of the most difficult issues for any couple is facing the prospect of declining health and even death.

It may not be pleasant to think about your own death or your spouse’s death, but it’s a discussion you shouldn’t ignore. It is probable that one of you will outlive the other, perhaps by years or even decades. By discussing death and end-of-life matters in advance, you can ensure financial stability for the surviving spouse.

Below are a few questions to discuss. If you don’t have answers for these questions, it may be time for you and your spouse to discuss them.


What assets, insurance and benefits are available for the surviving spouse?


If you’re like many couples, you and your spouse have accumulated a wide range of assets, benefits, and insurance policies over the years. It’s not uncommon for a retired couple to have employer retirement plans, individual retirement accounts, life insurance policies, pensions and more. The surviving spouse should be aware of all these assets and accounts so he or she can get their financial affairs in order.

Create an inventory of all these assets and accounts. The document should include a title for the asset or policy, the contact information for the firm that manages the asset and an estimate of the asset’s value. You should also include potential income sources, such as Social Security, pension benefits and more.

You probably don’t want your spouse to have to track down accounts and insurance policies in the days, weeks and months following your death. Discuss in advance and create an inventory to help them through this process.


What are your goals for your estate?


Do you and your spouse have an estate plan? Many people believe estate planning is only for the ultra-wealthy, but the truth is that it’s important for anyone who wants to leave a legacy for their loved ones.

Review your current planning documents, including wills, trusts and more. Has anything changed with your situation that would impact your estate and how it is distributed? Are there new children or grandchildren in the family who aren’t included in your current plan? Has the value of your assets increased, making it possible for you to leave more to your loved ones than you had originally anticipated?

You may want to consult with an estate planning professional. They can discuss your goals and objectives with you and then examine your current documents. If needed, they can help you revise or create new documents that better reflect your wishes.


Do you or your spouse have specific end-of-life wishes?


It’s possible that you or your spouse could spend the final days, weeks or months in a hospital or other health care facility. If you or your spouse develop a cognitive issue like Alzheimer’s, you could spend much of your final years in a state of incapacitation, a condition in which you are not able to communicate your own decisions and desires.

Now may be the time to discuss end-of-life care with your spouse. That way, both of you will fully understand the other’s wishes. You will then be able to make more informed decisions regarding each other’s health care should one of you become unable to make those decisions yourself.

Are you and your spouse ready to answer these tough questions? If so, let’s talk about it. We can help facilitate this conversation, and then help you and your spouse become better prepared. Let’s connect soon.

Forced Early Retirement Could Happen to You

Are you planning to work past traditional retirement age so you can shore up your savings? That could be an effective strategy. Working later in life gives you a few more years to save money, and it also may let you delay Social Security, which can increase your benefit amount.

Many workers have a similar strategy in mind. According to a study from Transamerica, two-thirds of baby boomers are planning to work past age 65. In fact, 15 percent of baby boomers say they will never retire. Why the strong desire to work past traditional retirement age? Most say they will work late into life because of financial reasons. They believe that working longer will help them overcome their retirement savings gap.1

Unfortunately, retirees don’t always get to decide when they’ll leave the working world. In fact, a study from the Employee Benefit Research Institute found that nearly half of all retirees are forced to retire earlier than they had planned.2

As you might expect, a forced early retirement can have a sizable impact on your financial stability. When you are forced to retire early, you lose working years in which you would have contributed additional funds to your retirement accounts and you create additional retirement years that you may have to fund with distributions from your savings.

Do you have a contingency plan in place for forced early retirement? If not, now may be the time to develop a plan. In an ideal world, you would choose the age at which you retire. However, it may be wise to have a plan in place in case you don’t get that option. Below are a couple of reasons why you could be forced to retire early:


It’s natural for health issues to become more prevalent as you advance in age. The truth is, though, anyone of any age can suffer a disability that requires them to take a prolonged absence from work or to leave their career altogether.

In fact, the Council for Disability Awareness estimates that 1 in 4 adults in America will suffer a long-term disability at some point in their career. The group also has found that the average worker estimates having only a 2 percent chance of suffering a disability. The reality is the average worker has a 25 percent chance of suffering a disability.3

The good news is there are steps you can take to protect yourself from the financial burden that comes with disability. You may want to consider an individual long-term disability insurance policy, which could provide you with supplemental income until you reach retirement age. You also may want to create an emergency fund that you could tap into if you’re forced to leave your career early because of health reasons.

Job Loss

No matter what business or industry you’re in, the risk of job loss is always present. The economy changes very quickly. Even in strong economic cycles, businesses look for ways to streamline and become more efficient. What would you do if your position got eliminated and you were unable to find a new job?

Again, there are steps you can take to minimize this risk and the financial fallout. One is to keep investing in your skills and excelling in your career, even if your retirement is approaching. By making yourself more valuable to your employer, you may minimize the risk of being laid off. Also, an emergency reserve fund would be helpful in this scenario as well.

Ready to develop your backup plan? Let’s talk about it. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.





Social Security Basics: Answers to Your Questions

For nearly 80 years, Social Security has been a valuable resource for America’s retirees. The program was created in August 1935 when President Franklin D. Roosevelt signed the Social Security Act.1 The law created an independent governmental agency that would provide lifetime income benefits to retirees, the disabled and their surviving spouses and children.

The agency was originally called the Social Security Board but was later renamed the Social Security Administration (SSA). The SSA began collecting payroll taxes in 1937 and paid out the first lump-sum benefit to a Cleveland motorman the same year. He retired one day after paying a 5-cent payroll tax, and he received a retirement benefit of 17 cents.1

In 1940 the SSA started making monthly payments to retirees age 65 and older. While the benefits and eligibility requirements have changed slightly over the years, Social Security operates today much like it did in the beginning. Below are common questions and answers about Social Security and the role it may play in your retirement:

What does Social Security cover?

As of December 2017, Social Security provided benefits to more than 45 million retirees and dependents, over 10 million disabled Americans and dependents, as well as 6 million survivors. Retirees account for 72 percent of benefits; disabled workers account for 16 percent, and the remainder of benefits are paid to survivors.2

Nearly 90 percent of retirees receive Social Security benefits.2 Research indicates that many seniors rely on Social Security for a substantial portion of their income. Among retirement benefit recipients, half of married couples and 71 percent of singles say that Social Security represents more than half of their income.2

When can you file for Social Security?

You can file for Social Security as early as age 62, although you could see a benefit reduction of as much as 35 percent if you file at that time. To avoid a reduction, you need to wait until your full retirement age (FRA) to file. Most people reach their FRA between their 66th and 67th birthdays.3

You don’t have to file at your FRA, though. In fact, you can delay your filing all the way to age 70. Social Security offers an 8 percent benefit credit for every year that you wait after your FRA. If your FRA is 66 and you wait until age 70 to file, that’s a total permanent benefit increase of 32 percent.4

Will Social Security run out of money?

Much has been made of the prospect that Social Security may run out of money. While Social Security won’t disappear anytime soon, it’s true that the program faces some serious financial challenges. In 2020 the SSA will start paying out more in benefits each year than it collects in payroll taxes. That means it will have to dip into the trust fund, which is projected to be depleted by 2034.5

Even after the trust fund is gone, however, the program will continue to collect taxes to fund benefits. Experts estimate that with benefit cuts, perhaps as much as 21 percent, the program could remain solvent through 2090.5

Ready to plan your Social Security strategy? Let’s talk about it. Contact us today at Retirement Peace Project. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.







17846 – 2018/7/30

Is Your Retirement Strategy Built on a Solid Foundation?

Are you just starting to save for retirement? If so, you have company. A recent study found that nearly a third of all Americans have no retirement savings. An additional 22 percent have less than $10,000.1

The good news is you can get back on track and overcome your savings shortfall by developing a plan and taking action. There are plenty of steps you can take to boost your savings. For example, you can cut back on your spending. You could push your retirement to a later age. You could even work part time in retirement.

However, the most effective strategy may be to develop a foundation of solid financial habits. Retirement is a sizable financial challenge. It takes years of saving and preparation to achieve your goal and live your desired lifestyle. You can put yourself in a better position by taking action early. Below are three steps and lifelong financial habits to consider. Master these habits, and you’ll greatly improve your chances of funding a comfortable and enjoyable retirement.

Invest in your skills and potential.

Investments play a role in any retirement strategy. However, the most valuable investment you may make is an investment in yourself. Your ability to earn income may be your most valuable financial asset. You can improve your ability to save for retirement by increasing your income throughout your career.

Consider ways to improve your skills and advance your career. For example, could you gain a promotion by advancing your education? Could you learn new skills to make yourself more attractive to employers? Or is it time to consider a career change so you can elevate your earnings?

Your earnings drive your ability to save. Of course, as your income increases, it’s important that you allocate those additional funds to savings. If you simply spend the additional money, you won’t capture the benefit of your increased earnings.

Minimize your exposure to risk.

Retirement planning is about accumulating assets, but it’s also about minimizing your exposure to risk. Any number of threats could derail your retirement plans. You could become disabled and have limited earning potential. You or your spouse could pass away unexpectedly, creating a financial crisis for the family. You could see a sizable downturn in the value of your investments. You might face a costly health care challenge that drains your savings.

Develop a retirement strategy that minimizes your exposure to these risks and others. Insurance is an effective risk management tool. You can use disability insurance to replace your income should you suffer a serious injury or illness. Life insurance can protect your family should you pass away. A financial professional can also help you find tools and strategies that reduce your exposure to market risk.

Regularly review your plan and adjust accordingly.

Life changes. When it does, your retirement strategy should change with it. Take time each year to review your strategy and see if it still aligns with your needs, goals and risks. For example, perhaps your family needs have changed. Maybe you suffered a career setback that changes your savings capacity. Or you may simply have a lower tolerance for risk.

Your financial professional can help you analyze your strategy and objectives and make the appropriate changes. For instance, they may suggest an annuity that protects you from downside loss. Or they could suggest a change to your savings strategy to maximize tax efficiency.

Ready to build your retirement strategy? Let’s talk about it. Contact us today at Retirement Peace Project. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation.




17859 – 2018/7/31

Gen X: A 3-Step Retirement Catch-Up Plan

Are you a member of Generation X? Feeling uncomfortable about your preparedness for retirement? You’re not alone. A recent study from Transamerica found that only 12 percent of Gen Xers feel secure about their ability to retire. The study found that the average Gen X household has only $69,000 in retirement savings.1

Generation X is generally defined as individuals born between the mid-1960s and the early 1980s. They’re also known as the “sandwich generation,” because they’re squeezed between two much larger generational groups—baby boomers and millennials. Most Gen Xers are in their 40s or 50s. While they still have time to save for retirement, their window is quickly closing.

Are you a Gen Xer who’s behind on retirement? If so, now may be the time to take quick action. You can still reach your savings goal if you are disciplined and focused. Below are a few tips to help you get started:

Estimate your retirement number.

Have you ever gone on a road trip without knowing your final destination? Probably not. Without an endpoint, it would be impossible to develop a route or track your progress. The same is true in retirement planning.

Your retirement strategy should have an endpoint in the form of a retirement number. That’s how much you need to save to fund your expenses and desired lifestyle in retirement. Obviously, you can’t predict every expense you may have in retirement, but you can develop an informed estimate based on your current spending and inflation.

You can also project your sources of retirement income, such as a pension or Social Security. If those sources don’t cover all your expenses, you’ll have to fund the difference with distributions from your savings. Multiply that difference by the expected duration of your retirement, such as 30 years, and you’ll get a ballpark retirement number estimate.

Obviously, this exercise is simple and doesn’t include other factors such as inflation, increasing health care costs or investment returns. However, it’s a good starting point to see where you need to go. A financial professional can help you develop a more precise retirement estimate.

Cut your expenses and save the difference.

There’s no more effective retirement strategy than to simply spend less and save more. Of course, that may be easier said than done. One way to reduce your spending is to implement a budget, as it helps you manage your spending and track your progress toward large financial goals such as retirement. Unfortunately, nearly 60 percent of Americans don’t use a budget.2

If you’re among that group, now may be the time to make a change. You can use an online budgeting program or a simple spreadsheet, or even a pencil and paper. Look for areas to cut back, like on entertainment and dining out. Perhaps you could consolidate debt and reduce your interest costs. Every dollar in spending you can cut is a dollar you can allocate toward retirement.

Protect yourself against risk.

Even if you’re saving a sufficient amount of money, all it takes is one outsize risk to throw a wrench in your retirement plans. For instance, you could suffer a disability on the job. Or the unexpected death of you or your spouse could create financial difficulty. The financial markets could decline sharply.

Work with a financial professional to evaluate your risk exposure and take preventive action. For instance, you could use insurance to protect against disability risk or unexpected death. Tools such as annuities can protect against market loss and even generate guaranteed* retirement income. Develop a risk management strategy to protect your retirement.

Ready to develop your retirement strategy? Let’s talk about it. Contact us today at Retirement Peace Project. We can help you analyze your needs and goals and develop a plan. Let’s connect soon and start the conversation.





Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.


*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.


17847 – 2018/7/30

Check These 3 Items Off Your Planning List Before You Retire



Trying to decide when to retire? It’s a question that every worker faces at some point. In some cases your decision is made for you, because of health issues or employer restructurings. In an ideal world, however, you would get to retire at the time that’s right for you. There’s no universal correct answer on when that time is. It should be based on your unique needs, goals and objectives.

It may be helpful to think about what you need to complete before you retire. For example, you may want to save a certain amount of assets. Or you may want to reach full retirement age (FRA) for Social Security. Maybe you have stock options or other employer benefits that need to vest before you leave the working world.

There are also planning items you can use to minimize risk and improve your odds for success. Below are three such items. If you’re thinking about retirement but haven’t completed these items, now may be the time to do so. A financial professional can help you complete your planning so you can enter retirement with confidence.

Develop your retirement budget.

Are you one of the 60 percent of Americans who don’t use a budget?1 If so, retirement is the perfect time to make a change. A budget is one of the most effective financial tools available because it helps you make informed purchasing decisions and stay on track to reach your goals.

A budget is especially important as you enter retirement. One of the biggest risks in the early years of retirement is that you spend too much and deplete your assets too quickly. That could lead to you not having enough money in the later years of retirement. A budget can minimize this risk.

You can’t predict every expense you’ll face in retirement, but you can make estimates based on your current spending and your desired lifestyle. Also, be sure to include inflation in your budget. Your cost of living is likely to increase over time.

Map out your retirement income.

Where will your income come from in retirement? If you’re like most retirees, you’ll receive Social Security benefits. You also may receive a pension or some other type of income. And you’ll likely need to take distributions from your 401(k) plan, IRA or other retirement accounts.

Take some time to project your income. The Social Security Administration can provide you with benefit estimates, and your company’s human resources department should be able to provide estimated pension payments. A financial professional can help you determine a reasonable distribution amount to take from your savings each year. You also may want to consider an annuity, which can generate guaranteed* lifetime income.

Minimize your risk exposure.

Life can be unpredictable, and it’s possible that your retirement may not go according to plan. For instance, you or your spouse may develop a condition such as Alzheimer’s that requires long-term care. The financial markets could suffer a downturn that limits your ability to draw income. Your health care costs could be greater than expected.

A financial professional can help you develop strategies to minimize your exposure to risk. For example, you may want to consider long-term care insurance. An annuity could be a helpful tool to guarantee* your income and minimize downside risk. These steps and more could help you avoid dangerous threats that could sink your retirement.

Ready to implement your retirement strategy? Let’s talk about it. Contact us at Retirement Peace Project. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.



*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.

17848 – 2018/7/30


Self-Employed? 3 Retirement Account Options

For many, self-employment is a dream come true. You get to set your own schedule and make your own rules, and you may even get to do something you love for a living. If you’re like most entrepreneurs, your self-employment is the result of years of hard work and planning.

While self-employment may be fulfilling, it can also create unique challenges, especially when it comes to retirement planning. You don’t get the benefit of an employer 401(k) or pension. You may face tough decisions about whether to save for retirement or reinvest in your business. You may face cash flow challenges that make it difficult to save.

The good news is, as a self-employed individual, you have options that aren’t available for traditional employees. In fact, you may be able to put large sums away on a tax-advantaged basis each year. Below are a few popular vehicles you can use to save for retirement:


Solo 401(k)

The Solo 401(k) is much like traditional employer 401(k) plans, except it’s meant for one-employee companies. As the owner and employee, you make both the participant and employer contributions. That allows you to put a significant amount of money into the plan each year.

In 2018 you can put as much as $18,500 into the plan, or up to $24,500 if you’re age 50 or older. That’s the employee contributions portion. As the employer, you can also contribute up to 25 percent of compensation. Your compensation is defined as your net income less one-half of your self-employment tax and contributions. Your total contributions can’t exceed $55,000.1

It’s important to remember that these contributions are deducted pretax. That means they reduce your taxable income and thus your tax exposure. The funds are then invested and grow tax-deferred until you take distributions in retirement.



The Simplified Employee Pension (SEP) IRA is a popular choice for entrepreneurs. It operates much like a traditional IRA but with higher contribution limits. You make tax-deductible contributions to the account, and your funds grow tax-deferred. You pay taxes on all distributions from the plan.

You can contribute up to 25 percent of your income to a SEP IRA in 2018, with a maximum contribution of $55,000. If you’re 50 or older, you can contribute as much as $61,000. Keep in mind that if you have employees, you’ll have to make contributions for them, too. However, contributions are discretionary, so you can change the contribution amount from year to year based on your income and cash flow.2


Defined Benefit Plan

A defined benefit plan, also known as a pension, could give you added flexibility and savings capacity. You can contribute to a defined benefit plan alongside a solo 401(k) or SEP IRA. You design the plan to meet your needs and fund it to provide a desired level of income after you retire. The contributions are considered business expenses, so they’re tax-deductible.

However, there are some important considerations with a pension. First, you have to commit to an annual level of funding, so it may not be a wise strategy if your cash flow fluctuates. Also, you’ll have to offer participation in the plan to any employee you hire. That could get costly over time if you plan on expanding.

The Retirement Peace Project is a “non-commercial” retirement education organization.  Classes are supported by local churches, employers and United Way chapters. Call us today (217) 498-7700 for a schedule of an upcoming Retirement Peace University in your area.







17747 – 2018/6/19