Self-Directed Pension Plan Opportunities

More self directed pension plan options are becoming available.  As previously noted more and more companies are cutting back or eliminate their employee pension plans. Plus, each year more individuals are becoming self-employed. Sadly, most people are not aware of the various tax deferred pension plan options.  Let’s take a look at what is available.  Some of these tools might just provide the vehicle you need to reach your retirement income and wealth goal.

When I first looked into self-directed pension plans many years ago, I thought it was a very simple concept with just IRAs and Roth IRAs being available. Subsequently, however, I quickly learned there are many different types of Self Directed Pension Plans. In a nutshell, this is what is available today.

1.  Individual retirement accounts are both the traditional IRA and Roth IRA

·    Self Directed Traditional IRA permits contribution until age 70½, at which time you must begin distribution.

·    Self Directed Roth IRA permits contribution to the plan as long as you live.

2.  Small Business Plans include "supercharged" plans, such as the SEP IRA, SIMPLE IRA, 401(k), and solo 401k that permit larger contributions and tax deductions (possibly more than $50,000) while you are still contributing to a traditional or Roth IRA. As an investor, you most likely qualify for one of these plans.

3.  Defined Pension Plans that are specifically designed for a business that are tax-deferred and permit very large annual contributions that may exceed $1 million per year. These plans don’t require employees to participate and may be used only by the business owner, and possibly its business executives.

The individual retirement accounts, small business plans and defined pension plans have different contribution limits that are defined by the tax code and change from year to year.

The next few blog posts will cover key elements and what you need to setup and operate a tax deferred pension plan that makes the most sense for you. 

In the meanwhile, if you want further information on these various pension plans, talk to your certified public accountant (CPA), attorney and financial advisor. Interestingly, it is not uncommon for a trusted advisor to not to have heard of self directed IRAs and other types of self directed pension plans.

If your advisor is not familiar with self directed pension plans, have him or her contact an IRA/pension plan custodian or administrator possessing a lot of experience with self directed plans. You should also encourage your advisor to join a self directed IRA professional advisor network.  If you need help in finding someone to act as your advisor, they can be found using the internet. Or respond back to this blog via email (don’t post your name or contact information) and I will be happy to help you in any way I can.