Fortunately, and perhaps surprisingly, you can create easy pension options for your small business. These easy options are usually available regardless of whether you operate as a sole proprietorship, partnership, limited liability company or corporation. And for many small business owners, the easy options also often represent the best value.
Easy Option #1: A Traditional Individual Retirement Account
To start, don't overlook the traditional individual retirement account. No matter what your family income, if neither you nor your spouse are covered by some other qualified retirement plan, you can deduct contributions to a traditional IRA. Typically, neither the business nor the individual pay fees or pay only modest fees to have an IRA in place.
Regular annual contributions to a traditional IRA grow large over time. A $5,000 annual contribution (the standard amount allowed in 2008) made over 35 years grows to more than $550,000 after adjusting for inflation. (I'm assuming you can earn a six percent real, or adjusted for inflation, rate of return in this scenario and the others that follow.)
That $550,000 IRA balance is actually a pretty good ending account balance--enough for many business owners' retirements if they've also paid off a mortgage and qualified for social security. And remember that married couples can often double the ending value amount by doubling the annual contributions.
In summary, then, a traditional IRA shouldn't be overlooked--especially if you and any employees want to save only a few thousand dollars a year.
Easy Option #2: A Simple-IRA
If you or employees want to save more money than is possible with a traditional IRA, you can often for free or almost free set up a Simple-IRA plan for the business.
Essentially, a Simple-IRA works like a "lite" version of a 401(k). With a Simple-IRA, employees and the business owner can contribute up to $10,500 ($13,000 if aged 50 or older) of their earned income to the Simple-IRA account. The employer annually matches the employee's contributions, too, with a standard 3% of salary contribution.
If someone making $50,000 contributes the maximum $10,500 amount to the Simple-IRA and the employer contributes another $1,500 (three percent of the $50,000), the employee accumulates roughly $1.2 million in savings after 35 years. Again, I've adjusted for inflation and used a 6% after-inflation return.
Easy Option #3: A SEP-IRA
One other inexpensive yet powerful small business pension plan option deserves mention.
If you're a one-person business or employees usually don't stay around for very long, you may want to consider the SEP-IRA option. With a SEP-IRA, you can contribute up to 20% of your business profits in the case of a sole proprietorship or partnership or up to 25% of your wages in the case of a corporation, including an S corporation.
To give you an example of this, assume your sole proprietorship makes $100,000 each year, in this case, you can contribute $20,000 (20% of the $100,000) to a SEP-IRA account. Or, as another example, assume your S corporation pays you $80,000 in wages. In this case, you can contribute $20,000 (25% of the $80,000) to a SEP-IRA account.
Over 35 years, after adjusting for inflation, a $20,000 a year SEP-IRA contribution grows to roughly $2.2 million dollars. Here again, by the way, I've used a 6% annual investment return in my calculations.
As is the case with both the traditional IRA and Simple-IRA options, a SEP-IRA typically costs the business owner nothing or next to nothing. You won't get burdened with expensive set up fees or annual administration costs.
However, while you can make large annual contributions to SEP-IRA accounts (up to roughly $46,000), the plans don't work for every small business. And here's why: You must cover all employees who have been employed by you for more than three years and who are over the age of 21.
SEP-IRAs, then, are probably most attractive to one-person businesses-such as consultants and tradespeople-that don't need to worry ever about making the SEP-IRA contribution for employees.
Moving Forward
I've been pretty birds-eye in my discussions in this article, so you may have more questions. You should be able get answers about all of these retirement savings from just about any mutual fund company, bank or stock broker. Note, by the way, that the annual contribution limits typically get adjusted for inflation.
Copyright (c) 2008 Stephen Nelson
Grants For Women Small Businesses
The average automobile, if you follow the maintenance schedule, protect it from rust and drive reasonably, should last you six to 10 years. The maintenance schedule is based on your use of the car as a complex tool to get you from Point A to Point B. Your computer is also a complex tool and your usage will determine its maintenance and protection needs; how you follow through with those needs will determine how long you'll get to use your computer, and when you'll need to put monies toward its replacement.
This five-part routine is based on my experience since the early days of personal and ?mobile? (Kaypro II) computers in the 1980's. It is equally applicable to both Windows?- and Macintosh?-based computers, although I use Windows? XP as an example throughout simply because of the Windows? prevalence. I am assuming an office / cubicle-based computer. If your computers are located in dusty warehouses or manufacturing floors, step up the physical annual maintenance routine to be quarterly.
1. VERIFY YOUR PHYSICAL SETUP
Just as it's hard to keep a car in top condition out in a pasture, it's hard to keep a computer functioning well if it's in a poor environment. There are three factors to consider: temperature, air quality and electricity.
For most computers, room temperature should be between 60-85 degrees Fahrenheit with a humidity level between 50-75% (to minimize any static build-up). While most offices are kept at this level, check with your landlord to ensure when you leave at night that the HVAC does not change (or is cutoff) to be above or below these levels.
Air quality is important because computers require air circulation to prevent overheating. There are two rules of thumb: First, the vents on the case need a good 3-4 inches of clear space (no blocking cable tangles, etc.) to get good airflow; that's roughly the width of your hand from thumb to pinkie finger. Second, if you use air cleaners / ionizers, keep them at least 2 feet from the computer or any particles heading for the cleaner will be drawn into the computer first.
Electricity is a dominant factor in determining the longevity of your computer. It's akin to the oil, fuel and coolant in your car's engine. Poor or dirty engine liquids will take their toll on your car and shorten its life. So-called ?dirty? electricity (brownouts, surges, sags, spikes, etc.) will damage your computer, and your files, far more effectively than any virus.
There are four steps to good electrical conditions:
1. Ask your local power company to provide you a power profile / graph with the range of electrical sags and spikes entering your building over a typical billing period (if you lease, you may need to ask your landlord to obtain this). This will show you your problem areas and times. I recommend you obtain this report once per season (or quarter). We discovered a spike in power that occurred at 8:32am every morning when the neighboring manufacturing plant started its production lines.
2. Get good surge protection with battery backup. Plug your computer case and your monitor into the battery-back up portion ? and your docking station if you have a laptop; everything else (including printer) simply receives surge protection. There are three goals for the 5-10 minutes of battery backup: provide you time to save your work; assess if this is just a momentary flicker or a longer outage; and then, for an outage, to turn off your computer.
3. After an outage, wait five minutes before turning back on your computer. If the power grid has problems, they will usually show up within less than 3-4 minutes after power is first restored.
4. Power sag problems can be noticed when your local printer suddenly prints comic-book characters (?@#!l%^?, etc.) in the midst of printing. Beyond brief battery backup, contact the power company or a company like APC to work with you on solution options.
2. VERIFY YOUR ELECTRONIC SETUP
Automation is the name of the game when it comes to preventive computer maintenance for the busy small business owner or nonprofit executive. This is one area where automobiles are playing catch-up. There are three items that you must automate : virus protection, critical software updates and computer firewalls that are either part of the operating systems (such as Windows? XP's firewall) or part of your anti-virus software.
I recommend getting virus protection software that combines virus and spyware protection at a minimum; add the firewall option if you do not use an operating system with a built-in firewall (such as Windows? XP). Critical updates are just that ? software patches rated as ?critical? by the vendor; all other patches, enhancements and updates can wait for the end of the year.
3. MONTHLY PREVENTATIVE MAINTENANCE
Once a month, perform two tasks: clean your temporary files and empty your trash/recycle bin (you can do this with the ?Disk Cleanup? utility in Windows? XP); and then defragment your computer (run the ?Disk Defragmenter? utility in Windows? XP). Think of this as checking your oil, tire pressure, window washer fluid, and cleaning out the kids? toys in your car.
4. ANNUAL COMPUTER MAINTENANCE
Just like a car needs a tune-up once a year, so too does a computer. There are two parts: electronic and physical.
The electronic tune-up consists of the monthly maintenance plus a scan disk of your hard drives and a manual check of all software for updates. In Windows? XP, utilize the ?Check Disk? utility ? check both boxes to fix file system errors and scan for bad sectors.
For each software package such as Adobe? Reader or Microsoft? Office, check for updates using their built-in method or via their support/downloads website sections. Although you may not be required to do so, I recommend restarting your computer after each different software package has been updated. This will allow the various bits of code to properly ?register? with the computer and cause any error messages to be isolated to the last update you did (versus just ?something?).
The physical tune-up is short, yet can be intimidating. Don't let it be.
First, turn off and unplug your computer and your monitor. Second, unplug the rest of the cables from the computer case ? the network cable, the printer cable, etc. Inspect the cabling for any broken or frayed bits. Third, unscrew the case (generally in the back) and lift it off (some computers, like Dell and HP, have flip-cases that you press down a plastic button to open).
Now, with the hose/bristle-sweep attachment of your vacuum, clean off the air vents on the outside of the computer case and the monitor. Then, gently vacuum out the dust from inside the case. This is not a detailed spring cleaning; go lightly and quickly ? it should take you less than 30 seconds.
5. INDEPENDENT "HEALTH CHECK"
At least once every 18 months, if not yearly, ask someone you trust, or who comes recommended, to do a ?health check? of your systems and processes. Think of this as your ?10-point? check or other type of review you might subject your car to prior to a big trip. You want this done by an IT professional who is a generalist, not someone specialized in a particular aspect like back-up software or databases, or who has a solution in need of a problem. You want personalized advice focused on your technology, business and environment.
For recommendations, look on the web at generalist IT and consulting professional societies like ICCA.org, SPConsultants.org or IMCUSA.org. Educational institutes and nonprofits should also look at technology providers on NTEN.org or TechSoup.org.
If you or your organization cannot devote the time away from your business or mission, or are uncomfortable handling this maintenance, treat it no differently than your car ? ask for help for an IT professional or service firm. Use the annual ?health check? process to see their quality of work prior to any long-term commitment.
Following these simple guidelines will help you get the best benefit out of the technology you have for the least cost.
Both Stephen Nelson & John Avellanet are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Stephen Nelson has sinced written about articles on various topics from Finances, Setting Up Company and Tax Deductions. Seattle tax accountant and author Stephen L. Nelson wrote the bestseller Quicken for Dummies and numerous other books as well. He also publishes the
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