Solano Real Estate Scene: A look at Simplified Employee Pension IRAs
A Simplified Employee Pension IRA is a traditional IRA that allows self-employed individuals to contribute up to 25% of their net income, a maximum of $58,000, into an IRA each year.
This is a powerful way for independent contractors, like real estate agents, to build a pension and defer their taxes on income just like a 401 (k), which is now being offered by most large employers. The SEP IRA can be a great tool for small businesses, too, that have valuable long-term employees that the employer wants to retain.
Realtors do have a lot of tax deductions and expenses, however the full-time successful agents that file a Schedule C and show a profit of $100,000, for example, can invest $25,000 and substantially reduce the amount of taxes they must pay April 15th each year while simultaneously building a retirement fund of income-producing assets for a happy life in retirement.
I recommend a diversified portfolio of individual stocks, mutual funds, exchange traded funds and real estate, but keep in mind that I hired Mark Sievers and his team over at Epsilon Financial Group in Fairfield 20 years ago to manage 50% of my IRAs to protect me from myself after losing money when the tech bubble popped in 2000.
Mark has a ton of initials after his name and my brother Greg is a CPA. I graduated from Sacred Heart High School where I maintained a solid 2.5 GPA and remained sports-eligible all four years from 1973 to 1977, and then began my finance career for Beneficial at 19. I have learned over the years that paying for financial advice on taxes and investments from conservative and super smart professionals is worth every penny.
For those of you who are nervous about having 100% of your IRA in the stock market, you can investigate a self-directed IRA where you can invest in things that you cannot get through Charles Schwab and the public markets.
I set up an IRA with The Entrust Group after learning about them from a real estate broker 22 years ago. I use this IRA for doing short-term bridge loans for clients. I didn’t use this IRA for buying flips after the crash of 2008 because I have no talent or expertise on fixing up houses, but many flippers rolled over some of their traditional IRAs into companies like The Entrust Group to buy and flip foreclosures and short sales.
Self-directed IRAs allow people to invest in companies that are not traded on Wall Street. I don’t own any, but I believe some folks buy gold bricks and coins via self-directed IRAs.
Again, my advice is to talk to experts and have a financial adviser to help you achieve your retirement and real estate goals.