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Apr 15, 2009 
Happy Tax Day everyone!
First, a quote by one of my favorite sci-fi authors…
“Be wary of strong drink. It can make you shoot at tax collectors… and miss”. – Robert A. Heinlein
When you work for an employer, they dictate the terms of your Retirement Savings plan. And retirement savings allow you to reduce your current income and save in a tax advantaged account for later in your life. So, once you are making beyond what you need to live in the present, you can put money away and escape taxation on the money.
Companies can setup a 401(k) plan and invest up to 25% of their wage salary plus about $16,000. So, for a business owner with a $70,000 salary, this would allow them to invest about $33,500 into their 401(k) and not have to pay any tax on that money in the present tax year (and it is not taxed until the money is withdrawn). You do not have to be income-rich in order to be paying 40-50% of your income in taxes, and this retirement savings allows you to invest 100% in your account, rather than just 50-60% that is left after taxes.
There are also other plans like SEPs (Simplified Employee Pensions) and DBP (Defined Benefit Plans) that can be used and may even allow you to put away much more money in a tax-advantaged way.
As the owner of the business, you have the ability to call the shots on how this plan will be setup. And if you have a spouse or children working in the business, money can also be put away in their retirement plans.
Consult a professional tax or financial advisor for more details on the tax advantages of retirement savings plans.
Have a fantastic Tax Day, and go join in a local Tea Party to protest the ridiculously wasteful spending plans now being rammed down our throats…
Rob
21 Comments 
(51 comments)
• Apr 15, 2009 @3:08 am
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