Retirement Planning for the Owner Operator

[Mountain Flyer]

Hey Y'all. What are you doing for retirement planning? Do you put money in an IRA? If so, what type?

I have not looked into this until now. When I worked for the "guv'ment" I put money into a 457 account (like an IRA) every month; also had employer backed retirement plan that I have a vested balance in. But between those, and Social Security, I am still WAY short of what I'll need to (hopefully) retire in another 10-15 years.

I need to sock away about $30,000 per year if I am ever gonna retire. And since I can't do that, well, I need to save all I can...What are you guys doing? :?

[Trucker_Matt]

well i am not an O/O but i put my money into my companies 401K (just enough so they can match it)..

then i have my personal IRA that i put money into.

[geomon]

My advice is meet with a financial planner or your tax person. They will help you try to figure out a budget you can live on and then set up a tax free account (IRA or something similar) for your business.

Avoid the temtation of seeing that cash each month and try to get a certain amount automatically transfered from your business acct into the taxfree acct so you don't have to rely on yourself to put it in.

[no_worries]

If you're self-employed and a sole proprietor you're basically limited to the various IRA's and SEPs. Whether a regular IRA or Roth is best for you depends on what your tax bracket is now compared to what you expect it to be in retirement. The maximum deduction you get with these is $4500/year. If you want to contribute more, you can look at SEPs. I think the maximum contribution is somewhere around $15,000 but I haven't kept up on those. One other option is the Solo 401(K). It has a much higher contribution limit but there are significantly higher fees involved since it has to be administered just like a regular 401(k). If it's an option, making use of a HSA is also a way to sock money away tax-free.

[brian]

save what I can but I keep rolling my profits back into mine and my wifes business, I do some trading mostly oil and gas stocks since i`ve spent a good chunk of time in the industry, although buying GM under 11 was a real nice buy.


we do piss some away though, my wife`s 24 and grew up a farmer and i`m 26 and grew up poor so between our 100 hour work weeks we like to cut loose


still I can`t complain, two years ago we had alot of plans and not a whole lot of cash, now our house is built and paid for and we`ve got two great kids.

[allan5oh]

Unfortunately this is something that many owner/operators and even company drivers do not plan for at all.

The younger you start, the better of you'll be.

I'm 25 right now, should be retired by the time I'm 45 if I play my cards right. Maybe even earlier.

The truck will be paid off in a couple months($1400 a month). that's going to go straight into investments.

[Sonny Pruitt]

most of the o/o I have talked to are planning on buying a hot dog truck

[ncnewbie]

I've done a lot of research on this for other business ventures. There's a way you may be eligible to put away that $30k/yr. It's called a Solo or Self Employed 401(k). The following is from http://www.smsmallbiz.com/The_Solo_401(k).html:

"Enter the solo 401(k) plan. For those who are looking to max out their contributions to a deductible retirement account, it's a major improvement. The reason: With a solo 401(k), annual contributions consist of two parts. And in this case, two is definitely better than one.

First, you can contribute up to 100% of the first $15,500 of your 2007 compensation or self-employment income ($20,500 if you'll be 50 or older at year-end).

And there's more: You can contribute and deduct an additional amount of up to 25% of your compensation income, or 20% of your self-employment income. This second part of your annual contribution is like what you can do with a traditional small-business retirement plan (mentioned above).

To see how the two parts stack up, let's go back to our examples.

Your corporation pays you $80,000 this year. The maximum deductible contribution to your solo 401(k) account would be a whopping $35,500 [$15,500 + (25% of $80,000)]. That's a lot more than the $20,000 you could contribute to a traditional plan (25% of $80,000).

Now say you earn $80,000 from your sole proprietorship. The maximum solo 401(k) contribution would be an impressive $31,500 [$15,500 + (20% of $80,000)]. With a traditional plan, your maximum contribution would have been a mere $16,000 (20% of $80,000).

If you're 50 or older, your maximum solo 401(k) contributions for 2007 would be $40,500 [$20,500 + (25% x $80,000)] and $36,500 [$20,500 + (20% x $80,000)], respectively. "

Fidelity Investments answers many questions about this type of 401(k) at http://personal.fidelity.com/product...sr?refpr=sb006
They'll take care of all the paperwork making setup a snap. Plus Fidelity provides a host of investment options.

You must designate in writing before the end of your tax year that you're making the elected deferral (that's the $15,500 portion). The Solo 401(k) relatively new and IRS approved (see IRS Publication 560). And all contributions are tax deductible!

And I just realized, here's a reason for incorporating that finally makes sense as you can contribute more if incorporated!

[solo379]

you may be eligible to put away that $30k/yr. It's called a Solo or Self Employed 401(k).

Yeah! But first you got to make those 30 grand extra..!
BTW is that on top of traditional IRA?

[ncnewbie]

As long as you still have earned income after the 401k contributions I've always found the answer to be yes.

[Sonny Pruitt]

where are these o/o's making all this $$$$$$

[Teal 95 KW]

They're getting all this "money" by not hauling general freight, watching their expenses, and keeping their overhead down.

[Sonny Pruitt]

This is after mortgage,car payments truck payments,medical insurance, college fund, braces,clothes for the kids, income tax, not to mention 8 grand for social security?

[Maniac]

This is after mortgage,car payments truck payments,medical insurance, college fund, braces,clothes for the kids, income tax, not to mention 8 grand for social security?

Most of them don't pay any of that, rent and truck payments, some don't even have to pay rent

[Teal 95 KW]

If they aren't paying mortgage payments, or rent payments...they are living out of their trucks? Kind of a pathetic way of life, and if that was the case, retirement planning is probably the last thing on their minds....

[allan5oh]

Is it not possible that one has their house paid off?

Most people should have it paid off by the time they're 40.

[no_worries]

Most people should have it paid off by the time they're 40.

That's an awfully broad statement Just what is the median home price in Winnipeg? :shock:

[geomon]

With a (standard) 30 yr mortgage, that means you need to be 10 yrs old when you buy to pay off when you're 40.

Now I that would be a GREAT way to spend one's allowance and paper route money

[Teal 95 KW]

Generally speaking..NOBODY is going to have their house paid off by the time they are 40. Very few people go the route of a 15 year mortgage, and at that rate, they would have to be into the house by the age of 25, which most people are not. Again, this is MOST people..there are exceptions, and there are people who pay their houses off early, but we are speaking of your GENERAL o/o who runs for $1.40 or so a mile (some get more, some get less, but I'm trying to be "down the middle" with this.) That person is not going to be able to have a paid off house (that is anything more than a single wide trailer), while making a tractor payment, possible trailer payment, insurance, fuel, kids, drivers wages, saving money, paying misc. bills etc. Just not feasible, unless his/her spouse has a very well paying job.

[allan5oh]

With a (standard) 30 yr mortgage, that means you need to be 10 yrs old when you buy to pay off when you're 40.

Now I that would be a GREAT way to spend one's allowance and paper route money

30 yr mortgages are standard now!?

That's lunacy.

If you cannot afford a home on a 15 yr mortgage, the home should not be bought.