This past year I was not able to moonlight and last year I moonlighted half of the year. I just came across some bonds that have matured (amounting to ~$8-10k) and wanted to contribute to a retirement plan. The hospital I work for has a 401k but they don't match contributions, so there is not necessarily any benefit to contributing through payroll (I believe). Also, since I didn't moonlight last year, I'm not sure if I would qualify for a SEP. I'm also not sure if I have time to take care of this after the new year. What road do you think I should take?

Zip Code: 02118

If you have no moonlighting income, then contributing to a SEP IRA is out of the question.

And if you haven't been contributing to your employer sponsored 401(k) plan, then at this point, all you could do is to instruct your employer to withhold 100% of your remaining salary through the remainder of the year. I don't agree with your assertion that no match makes a 401k no good, and I will follow up this post with an article I wrote about this exact topic.

So what's left? It appears that your only option is contributing to either a traditional IRA of a Roth IRA for 2006. You have until 4/15/07 to contribute to an IRA for 2006. This year, you can put away up to $4k ($5 if 50 or older).

I see you're from the Boston area. During our January 31st talk at the Brookline Holiday Inn, my brother Rick will be giving a 45 minute presentation on retirement savings opportunities. For more info, check out www.mdtaxes.com/meeting. We have 9 speakers lined up for the presentation. Maybe we'll see you there.

Zip Code: 01801

NO MATCH DOESN'T MEAN NO GOOD

by Andrew D. Schwartz, CPA

The most surprising observation made by the Schwartz & Schwartz staff this past tax season was the number of people who opted not to contribute to their employer sponsored 403(b) or 401(k) plan because their employer didn't provide them with a match.

Most employers offer either a 403(b) plan or a 401(k) plan as a way to help their staff save for retirement. Not-for-profit hospitals and universities generally offer 403(b) plans. Most other businesses offer 401(k) plans. Besides the name, there isn't a big difference between these two retirement savings plans these days.

Amounts contributed to either of these plans reduce your taxable earnings and grow tax deferred. As an incentive for their employees to save, many employers provide a "matching contribution" to their staff.

If you're fortunate enough to work for a company that matches the salary deferrals you make during the year, make sure to contribute enough to the plan each year to max out your employer's match.

Let's say your employer matches 100% of the first 3% of your salary that you put away through your 401(k) or 403(b) plan each year, and 50% of the next 2%. If your annual salary is $60,000 and you contribute at least $3,000 (5% of your salary) during the year, your employer will make a matching contribution of an additional $2,400 into your account. Contributing less than 5% of your salary means that you're leaving some of your employer's money on the table.

Even if your employer doesn't match your salary deferrals, taking advantage of these tax-advantaged retirements savings plans still makes sense. Let's say you're in the 25% federal tax bracket and live in a state with a 5% tax rate. For each dollar that you sock away into your 401(k) or 403(b) plan, you'll cut your tax bill by $.30. It only costs you $700 in post-tax dollars, therefore, to have $1,000 growing tax deferred within your own retirement savings account

Not convinced? If there's no way you'll contribute to one of these plans unless you receive a match, why not tell yourself that the government is providing you with a match. For every $700 you contribute, the government chips in $300. And you get to keep the compounded earnings on the government's money for as long as it remains invested.

Need more convincing? The more you earn, the larger the government match. With a top federal tax bracket of 35%, the federal government will kick in almost $5,000 for high income taxpayers who max out their 401(k) or 403(b) plans this year. And if you live in a highly taxed state or locality, such as NYC with a combined state and city tax rate of 11%, it'll cost you as little as $.55 for every $1.00 invested, assuming you're in the top tax bracket. That sounds like a good match to me.

For 2006, you can contribute up to $15,000 into your 403(b) or 401(k) account through salary deferrals. Anyone 50 or older by December 31 can sock away an additional $5,000 this year.

Other advantages of these plans is that the money in your account is very protected from your creditors, which has a lot of value for people in the healthcare field these days. Plus, the money is somewhat accessible, since you can generally borrow half of your balance in your account - up to $50,000. You then pay back your own 401(k) or 403(b) account, plus interest, over no more than five years.

If you haven't signed up to participate in your employer's 401(k) or 403(b) plan yet, give it a try. Even it your employer doesn't match your deferrals, contributing to these tax-advantaged retirement plan is one of the best deals available to you during your working years.

Zip Code: 01801