thanks!

Assuming AGI>300k - could i be doing smarter things than putting 4-5k/year in a non-deductible IRA? especially considering the IRA isn't very liquid

Zip Code: 02891

Here is the order that seems to make sense for people making good money:

1. Start by maxing out your salary deferrals at work.

2. If you're self-employed, max out your SEP.

3. Contribute $4k (increasing to $5k in 2008) to your IRA and if your married, to your spouses IRA, as a non-deductible IRA which you can consider converting to a Roth in 2010.

4. If you have kids, take a good look at 529 plans.

And then with whatever money is left, start to build up a tax-efficient portfolio within a taxable account.


The common thread to each of these items is that you will be saving money. The earlier you start, the more years you have to take advantage of compounded growth.

Zip Code: cpa@mdtaxes.com

Adrian,

If you have employees, a SEP-IRA is a terribly costly way to gain a tax deduction and save for retirement. Let me illustrate. Suppose you earn $230,000 or more. You want to put in the max $46,000 into the SEP-IRA. You have two employees, one earning $45,000 a year and the other earning $35,000 a year. Into the SEP-IRA, you'll be putting into the SEP-IRA for one $9,000 and for the other $7,000.

Using a cross-testing 401k you could likely cut that $16,000 a year cost in required contributions for your staff to just $4,000. It depends on factors such as age and so forth, but as you can see, the savings could be $12,000 a year.

Zip Code: 83402