Self-employed techs

[Frank Emerson]

>If you invest in an IRA, is the amount you invested exempt from income tax AND self-employment tax?

Yes!  Not only that, but the return on that investment is not taxable ... until you retire, and start drawing from it.  There are also SEP plans for the self-employed.  These are more similar to an employed person's 401K.  Another often overlooked tool for retirement planning is the Roth IRA.  You don't get the immediate tax break with a Roth, but it is tax free in retirement.  If you have a balance portfolio, with both SEP and Roth IRA's, you have a significant advantage in retirement.  You can start each year in retirement drawing on your SEP resources, that will then be taxable.  When you approach a magic number that would put you in a higher tax bracket, switch to drawing on the Roth IRA's, which are not taxable in retirement.  

For younger folks with lower income than they will enjoy later in their career, it is a good idea to start retirement preparation with a Roth IRA.  In the early stages of one's career, you won't benefit as much from the immediate SEP tax break, as you will benefit from the Roth tax break in retirement.  Later, when you have greater income and can really benefit from the immediate tax break, then start working on a SEP.  My brother is also my stock broker.  I have learned a lot from him.  I only wish I knew when I was young what I know now!  

$100 invested in retirement preparation when I was 20, would have been worth more than $2,400 contributed to the same retirement plan now!  That is not an exaggeration, or just numbers "off the top of my head."  I've crunched the numbers based an a very modest estimate of growth compounding.  There's no reason why a young American of modest income cannot retire a millionaire(ess) with a reasonable retirement plan!  In fact, in this day and age (or in the very near future), you must retire a millionaire to be fully prepared for retirement.  

Frank Emerson
-------------- next part --------------
An HTML attachment was scrubbed...
URL: https://www.moypiano.com/ptg/pianotech.php/attachments/20071005/6e0ef227/attachment.html