Up to now,
we’ve spent some time discussing how to buy out a partner’s interest in the
event of a premature death or a long-term disability. We also have described several ways to
transfer your business within the family or to a Key employee. So let’s say you don’t plan on dying while
you own the business and since you lead a very cautious business life, you
think you won’t become disabled. Are
there any other ways to accumulate money to purchase a partner’s interest? Even if you are the sole owner (as in a sole
proprietorship) is there a way to save for retirement in addition to a pay-out
you’d receive for the value of your business?
YES! Making some SMART, PROVEN INVESTMENTS
is another good way to go. Actually, I
believe a business should do ALL of the above because as we all know far too
well that “stuff” happens. So let’s
begin a study of some investments that may appeal to you.
There are
two ways you can go with Investments. First
would be to establish your own Individual Retirement Account (IRA) or a
QUALIFIED PLAN. You may not have heard
the term QUALIFIED before but it is essentially an investment that you can usually
deduct off your income tax and that grows tax-deferred. The other way is
referred to as NON-QUALIFIED. Here I refer
to accounts that you can establish that do NOT deduct off your income tax and
usually do not grow tax-deferred. For
now let’s briefly talk about QUALIFIED PLANS, most notably an IRA.
The biggest
appeal of an IRA or other Qualified Plans is that any contribution you make is
one that you can deduct from your taxable income in any given year. Here are the main points I want you to keep
in mind.
A. Contributions are tax-deductible
B. Assets grow tax-deferred
C. If you withdraw monies BEFORE 59 and ½, there is a 10% IRS
penalty
D. You Must start making withdrawals by
the Age of 70 and ½
E. The current maximum you can
contribute is $5,500
F. If you are over the age of 50, you
can add $1,000 or a total of $6,500
You may have
heard about a Roth IRA. We discuss this
shortly as there are distinct difference between the two. Next we will be discussing some forms of
investments for your IRA.