By Kate King
Saving for retirement should be on the top of your list of priorities right now. As a freelance lawyer and a self-employed individual, you have a wonderful opportunity to divert a sizeable amount of your income into a retirement vehicle and reduce your taxable income each year by opening a SEP IRA. This retirement account is very appealing due to the ease of set-up, the flexibility with regards to contribution amounts and the minimal administration costs. Contributions to a SEP IRA are 100% tax-deductible, and the investment earnings, dividends and income grow tax-deferred. The exact amount allowed for each year depends upon whether you are 1099’d or W2’d, but either way you are allowed to contribute at least 20% of your gross adjusted income for each year up to a $49,000 annual maximum. Unlike traditional IRAs, the total family income is irrelevant to whether an individual qualifies for a SEP IRA. A Financial Planner can quickly and easily determine the exact amount you are eligible to contribute. In general, the SEP IRA must be set up and funded by your tax filing deadline. There is no minimum amount to set up a SEP IRA. (This may differ amongst Financial Planners.)
It is simple to set up a SEP IRA, and it is extremely important. The SEP IRA is a wonderful opportunity associated with being self-employed. There is no other retirement account which allows you to set aside such a large sum of money and deduct it from your taxable income. Retirement is going to be very expensive, and you will be thankful later in life if you start to save and invest as early as possible. Each additional year that you contribute to your retirement account gives you one additional year to watch that contribution grow tax-deferred. You can always get a loan for your childrens’ college educations, but you cannot get a loan for retirement!
The SEP IRA is such an easy thing to set up. Please feel free to call me with questions you may have. I am a mother of a 5 year old son and a 2 year old daughter, and a great supporter of freelance lawyers like those in Montage Legal Group who have chosen to take control of their personal lives and careers. I am more than happy to help freelance lawyers retire in-style!
Kate King
CERTIFIED FINANCIAL PLANNER TM
The KFK Group
4000 Barranca Parkway, Suite 250
Irvine, CA 92604
Phone: (949) 262-3213
Fax: (949) 271-5090