If you’re self-employed, you have several options for a retirement savings plan.  The “best” plan for you depends on how much you want to save and whether your business has employees.  The IRS publishes a pamphlet with a great overview, so I’ll just review the highlights.

Plans for everyone: the IRA and the Roth IRA

Contributions to a traditional or Roth IRA are limited to $5,000/year or to your earned income, whichever is less.   If you’re over 50, you can put in an extra $1,000.   Money put into a Roth IRA is post-tax, but withdrawals after age 59 1/2 are tax-free.  Money put into a traditional IRA can be tax-deferred, subject to income limits, but growth and pre-tax contributions are taxed when withdrawn.

An employer can set up employee IRA accounts which can be funded through payroll deduction.

Best Reference:  IRS Publication 590 — Individual Retirement Arrangements

SEP’s and SIMPLE’s

The Simplified Employee Pension (SEP) allows the self-employed person to sock away more money — 25% of net earnings, up to a maximum contribution of $49,000.  An employer can also contribute directly to a SEP for employees.

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Tags: 401(k), IRA, retirement, self-employed, SEP, SIMPLE

My partner and I are accustomed to filling out forms that don’t reflect our family structure. We regularly scratch out “Father” and “Mother,” usually writing in “Parent” and “Parent”. We’ve trained our son’s school pretty well, and halfway through our first year with them, most of the forms we receive are addressed to the “Parents”.  Now that wasn’t hard, was it?

College and the FAFSA

Even though our son is only in first grade, it’s never too early to worry about how we’re going to afford his college education. (After all, it’s a mother’s prerogative to worry). The Free Application for Federal Student Aid (FAFSA) is used by most colleges and universities to determine how much a student should pay towards the cost of his/her education. Many, if not most, middle- and even upper-income families receive some sort of financial aid.

It occurred to me today that since my marriage isn’t recognized by the Federal Government, could I legitimately include just one parent’s income on the form? I’m not trying to cheat, but I do believe that Uncle Sam can’t have it both ways. If they choose not to recognize my marriage (which will (hopefully) be in its 28th year by the time my son starts college) then they have chosen not to recognize my marriage.

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Tags: FAFSA, gay taxes, LGBT personal finance, paying for college

I recently bought a Volkswagen Golf after my Mitsubishi Eclipse was crushed by an inattentive teenager driver.  Thankfully, I was able to pay cash for it using my “sinking car fund.”

If I hadn’t had the cash on hand, I would have considered three options to finance the new car:  an auto loan, a home equity loan, or a home equity line of credit.

I compiled the rates offered for the three types of loans by four local banks, as listed in the table below.

Auto Loan

An auto loan is likely the most common way to finance the purchase of a new car.  It tends to have the highest rate, but if you don’t own a home, it might be your only option.  The good news about an auto loan is that there are usually no closing costs and the paperwork is straightforward.  The bad news is that the interest paid isn’t tax deductible.

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Tags: cars, financing a new car, home equity line of credit, home equity loan

I’ve always wanted to own a piece of Warren Buffett’s magic, but at $111,111/share, Berkshire Hathaway (BRK.A) has been way too spendy for me. I’ve had to be content to watch from the sidelines. Smart investors bought 10 shares when it was outrageously priced at $10,000/share (circa 1992).

B-shares (BRK.B) were created for the common man, but even they were quite expensive at more than $3,000/share. On January 21, 2010, BRK.B split 50:1, bringing the share price down to a very reasonable $60-70. Now, Buffett can be bought by the unwashed masses.

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Tags: Berkshire Hathaway, BRK, BRK.A, BRK.B, Warren Buffett

While preparing to review “Saving Money,” a children’s primer, I noticed that the book’s frontispiece indicated it was purchased by the Donald E. Garrant Foundation.  Curious, I Googled the name to find that it is a corporate philanthropy dedicated to financial literacy.  They don’t have a website, but the tax returns of 501(c)(3) organizations are public, and it was easy to find it through the National Center for Charitable Statistics.

The Donald E. Garrant Foundation of Wakefield, MA

In 2007, the Donald E. Garrant Foundation funded:

• $3,608 to the Galvin Middle School for a school program on financial literacy
• $1,000 to the Foundation for the Advancement of Malden Education to purchase supplies
• $622 to the Wakefield High School to purchase Intuit software
• $766 to the Action for Boston Community Development to purchase financial literacy materials
• $5,860 to the Wilmington High School to purchase supplies for library books

None of the six officers of corporation received any compensation for their work.  The foundation’s only other expense was $1,250 in accounting fees.  Their total disbursements were $13,141 which is 6% of the funds’ total assets of $218,065.

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Tags: financial literacy, private foundations, teaching kids about money, The Donald E. Garrant Foundation

Recently I was at our town library with my six-year old son. I saw a copy of “Saving Money,” a slim easy-to-read book that I thought might make for an interesting review on the blog. Assuring my son that it wouldn’t count against his book limit of five, we checked it out and brought it home.

It’s never too early to teach the principles of financial literacy to children.  However, this book doesn’t cut it, and here are four reasons why:

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Tags: book review, financial literacy, Mary Firestone, saving money, teaching children financial responsibility