How Working for Yourself Can Boost Your Retirement Savings - TIME

How Working for Yourself Can Boost Your Retirement Savings

Posted: 17 Jan 2017 06:41 AM PST

When Kathleen Keating worked for IBM, she didn’t think much about her retirement plan. She signed up for the company’s 401(k) and left it at that.
But at the age of 40, she decided to leave the corporate world and become her own boss. That meant coming up with her own retirement savings plan as well.
What she found was surprising. Working for herself for the last nine years allowed the Boston-area public relations professional to set aside thousands of dollars more per year for retirement, reducing her income tax bill substantially, while giving her more options about when and how to invest.

“I have so much more flexibility,” she said. “When you’re working for someone else, you’re locked in to their retirement plans and you have to deal with HR and all the paperwork.”
Financial advisors say that retirement plans for self-employed Americans have become more popular in recent years, thanks to a 2001 tax law that allows them to put much more money away than most people who work for someone else. But to make it work, they have to be more diligent about setting up the accounts and putting money in regularly.
If they do, the difference can be substantial. Most workers on a traditional 401(k) can set aside a maximum of $18,000 this year—or up to $24,000 if they are over the age of 50. By comparison, a self-employed worker can quickly set up a type of investment account called a SEP IRA and put away 25% of their income, up to a maximum of $54,000 this year.
Self-employed workers willing to do a little more paperwork can also set up what is called a solo or individual 401(k), which allows them to put the typical $18,000 salary deferral in as well as 25% of their income, dramatically increasing the amount they can set aside in a year.
They can also put money in on their own schedule. Workers on a traditional 401(k) at a medium- to large-sized corporation typically need to sign up at the beginning of the year to have money taken out of each paycheck. Changing the contribution amount can take a few pay cycles, making it harder to catch up at the end of the year if you realize you weren’t putting away enough.
But donations to SEP IRAs and individual 401(k)s can be made in lump sums, whenever. For self-employed workers who can see big swings each month in how much they’re making, that makes it easier to put a chunk of money in when they’re having a good month and hold off when times are tight. And if they want, they can wait until they’re doing their taxes to add another big chunk to reduce their taxable income.
David Rae is a self-employed financial planner in West Hollywood who works with a lot of people in the entertainment industry who don’t have regular jobs or access to traditional 401(k)s. He set up a SEP IRA shortly after starting his business and recommends that his clients do the same to give themselves the option to set aside money when they have it.
“If you happen to have a good month, you can write a big check,” he said.
The potential market for self-employed retirement plans is huge. According to a report from the Pew Research Center, 14.6 million Americans were self-employed in 2014, representing about 10% of the national workforce. (Another 29.4 million, or about 20% of the workforce, were hired by self-employed Americans.)
Susan Diehl, president of PenServ Plan Services, a consulting firm that works with employers and financial institutions on retirement plans, said that individual 401(k) plans became “the hottest thing since sliced bread for the self-employed” in recent years because of how much workers can save.
She gives the example of a consultant over the age of 50 making $50,000 a year. With a SEP IRA, they could set aside up to 25 percent of their income, or $12,500. With a solo 401(k), they could put in another $24,000 on top of that, for a total of $36,500—or nearly three-fourths of their income. That would dramatically reduce their income tax while also saving much for retirement more than a traditional worker could.
Some older workers may need to. A national survey commissioned by Experian in 2016 found that 71% of Americans felt they did not have enough retirement savings.
For Keating, who has maxed out her contributions most years since starting her business, working for herself has helped her catch up to her retirement goals, and forced her to take a more active role in securing her financial future.
“I think if I was on somebody else’s payroll, I don’t know if I would be as diligent about having these conversations,” she said. “I 100% feel it’s all on me.”
Click here for more articles from Time Inc.’s Looking Forward series.

Trump inspires bipartisanship between Republican & Democrats to rein him in from Russia - Huffington Post

inspiring bipartisanship on Capitol Hill, but not in a way he wants: Republicans and Democrats in Congress are teaming up to try to prevent him from unilaterally lifting sanctions on Russia.

House Republicans and Democrats introduced a bill Wednesday to require congressional approval of any sanctions relief provided to Russia. It’s the same bill, the Russia Sanctions Review Act, that Senate Republicans and Democrats introduced together last week. The measure would give Congress 120 days to approve or reject a presidential effort to lift sanctions on Russia, and the president couldn’t move forward with lifting any sanctions during that period.

The legislation comes in the midst of a scandal involving the president and his team of advisers, and their potential ties to Russian officials who interfered in last year’s U.S. election to try to help Trump win. Trump’s national security adviser, Michael Flynn, resigned Monday amid reports that he not only talked to a Russian official in December about sanctions, but lied about it. Another report surfaced Tuesday indicating people on Trump’s campaign were in “constant” contact with Russian officials throughout the election.

Congress has been scrambling to make sense of the revelations, with questions arising about how much Trump knew about his team’s communications with Russians, and when. Trump, meanwhile, has said he’s open to easing sanctions on Russia. That’s not okay with many lawmakers, regardless of their party.
onversations with the Russian ambassador on the subject of sanctions makes this legislation all the more important,” Rep. Adam Schiff (D-Calif.), the top Democrat on the House intelligence committee and a co-sponsor of the bill, told reporters.

“If there were condoned discussions that Flynn had, or if he was acting as a free agent ― in either scenario, this president should not have the unfettered capability of eliminating Russian sanctions,” Schiff said.

Republican co-sponsors on the bill include Reps. Tom Rooney (Fla.) and Adam Kinzinger (Ill.) in the House, and Sens. Lindsey Graham (S.C.), Marco Rubio (Fla.) and John McCain (Ariz.) in the Senate. Rooney and Rubio sit on the intelligence committees in their respective chambers.
in a Congress largely divided along party lines. It also comes as Republicans, now in control of the legislative and executive branches, are eager to move forward with their agenda. The fact that they’re already teaming up with Democrats to rein in Trump’s actions on Russia, just four weeks into his presidency, shows how much Trump’s problems are affecting his party’s ability to focus on priorities.

The question now is whether the bill to scale back the president’s authority gets committee hearings and floor votes. That’s up to House Speaker Paul Ryan (R-Wis.) and Senate Majority Leader Mitch McConnell (R-Ky.).

House Minority Whip Steny Hoyer (D-Md.), the lead sponsor of the bill, said Foreign Affairs Committee Chairman Ed Royce (R-Calif.) has “expressed interest.” Hoyer said he plans to talk to House Majority Leader Kevin McCarthy (R-Calif.) about becoming a co-sponsor.

Royce told HuffPost later that Russia shouldn’t get any sanctions relief until it abides by the terms of the Ukraine peace process. He didn’t endorse Hoyer’s bill, but suggested he would advance a bill like it if Trump were to lift any sanctions before Russia got in line.

“If sanctions are eased prior to Russia’s full compliance with the Minsk agreements, I will certainly move legislation to keep them in place,” Royce said in a statement.

Asked if Ryan was on board, his spokeswoman, AshLee Strong, said: “The speaker said if there were efforts to weaken sanctions he would support measures to protect against that. He hasn’t endorsed any piece of legislation at this point as the sanctions are still in place.”

As for the Senate, McCain said McConnell hasn’t indicated to him if he supports the bill. McCain said he planned to meet with McConnell later in the day.

McConnell spokesman Don Stewart echoed Strong’s position. “I don’t know that he’s said anything new recently about it other than that the White House isn’t doing any sanctions relief, so there’s nothing for Congress to approve,” Stewart said.

Of course, if Ryan and McConnell gave a green light to the bill, lawmakers would have to pass it with a veto-proof majority, since Trump would likely veto it. Hoyer, for one, predicted it would have the votes to survive a veto. Asked if he’s reached out to administration officials about his proposal, he laughed.

“The White House is not necessarily focused on this matter at this point in time, I think it’s fair to say,” Hoyer said.