Retirement Planning for Preneed Insurance Sales Agents

This article was written by RichardD, on November 10, 2013

Retirement planning for preneed insurance sales agents

You may be familiar with typical employer 401(k) plans and even IRA accounts.

  As a self-employed independent insurance agent you have many retirement plan options available to you.  These retirement plan options can provide current tax benefits while building your future retirement. Even if you are the only employee, you can choose which retirement plan to set up for your business.  Depending on your selection, you may have to provide benefits for other eligible employees and may have additional compliance or reporting requirements but can get larger deductions compared to a traditional IRA.  A few retirement options and resources are briefly summarized below including the traditional IRA (which is an individual account and not a business plan).

  • Individual Retirement Accounts (IRAs): You and a spouse may be able to contribute up to $5,500 each into an IRA account for 2013 ($6,500 if age 50 or over).
  • Simplified Employee Pensions (SEP):  You can contribute up to 20% of your net self-employment income to a maximum contribution of $51,000 for 2013.
  • Simple IRA: You can contribute up to $12,000 ($14,500 if age 50 or over) per year plus employer match for 2013.
  • Profit Sharing: You can contribute up to $51,000 for 2013.
  • 401(k):  You can contribution up to $51,000 ($56,500 if age 50 or over) per year.

Tax Benefits of Contributions:

  • Deduction Benefits: When you make a deductible contribution, tax savings effectively pay a portion of the contribution for you.  Assume you qualify for and decide to make a $20,000 contribution.  This $20,000 contribution is effectively comprised of $6,000 in tax savings (assuming a 25% federal and 5% state rate) and $14,000 of your funds.
  • Tax Credit: Start-up costs to establish or maintain a new employee retirement plan may qualify for a credit totaling up to $1,500 ($500 for the first three years of the plan).

Retirement contribution due dates each year vary based on the type of plan.  IRA contributions are due by the due date of your tax return, generally April 15th.  Other plans are allowed to be set up and contributions made as late as the extended due date of your return, e.g. SEPs.

If you are interested in learning more about retirement plan options you may find the following helpful:

Article written by Richard R. Dahl, a CPA and Senior Tax Manager with Security National Life Insurance.  The content of this article is not intended as tax advice and cannot be used for avoiding tax penalties or promoting or recommending any transaction.  Individual circumstances should be discussed with a qualified tax professional.

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