08-15-2019 Columns


As a business owner, you can’t afford to ignore your competition. You can’t afford to miss out on the trends affecting your industry. You can’t afford to alienate customers. And here’s one more item to add to the list: You can’t afford not to create a retirement plan for yourself. Of course, you might think that, one day, you’ll simply sell your business and live off the proceeds. But selling a business isn’t always simple, and there’s no guarantee you’ll receive enough to pay for a comfortable retirement – which is why you should strongly consider creating a retirement plan now. Here are some of the most widely used plans: SEP-IRA: You can contribute up to 25 percent of your compensation — as much as $56,000 in 2019 — to a SEP-IRA. Your contributions are tax deductible and your earnings grow tax-deferred until withdrawn. This plan offers you significant flexibility in making contributions for yourself and your employees. Plus, as an employer, you can generally deduct, as business expenses, any contributions you make on behalf of your plan participants. SIMPLE IRA: In 2019, you can put in up to $13,000 — or $16,000 if you’re 50 or older — to a SIMPLE IRA. As is the case with the SEP-IRA, your earnings grow tax deferred. You can match your employees’ contributions dollar for dollar, up to three percent of compensation. If you work for yourself, you can combine employee and employer contributions, so if you use the three percent matching rule, and you earn enough to fully match employee contributions, you can put in up to $26,000 per year (or $32,000 if you’re 50 or older). Alternatively, you could contribute two percent of each eligible employee’s compensation each year, up to a maximum of $5,600, regardless of whether the employee contributes. Contributions to your employees are tax deductible. “Owner-only” 401(k) plan: If you have no employees other than your spouse, you can establish an “owner-only” 401(k) plan, which functions similarly to a 401(k) plan offered by a large employer. Between salary deferral and profit sharing, you can contribute up to $56,000, in pre-tax dollars, to your owner-only 401(k), or $62,000 if you’re 50 or older. Like a SEP-IRA and SIMPLE IRA, a 401(k) provides the potential to accumulate tax-deferred earnings. However, you could choose to open a Roth 401(k), which can be funded with after-tax dollars. With a Roth 401(k), your earnings can grow tax-free, provided you’ve had your account at least five years and you don’t start taking withdrawals until you’re at least 59-1/2. Which plan is right for you? The answer depends on several factors, such as whether you have any employees and how much money you can contribute each year. But all the plans mentioned above are generally easy to establish, and the administrative costs are usually minimal. Most important, any one of them can help you build some of the resources you’ll need to enjoy the retirement lifestyle you’ve envisioned. To select an appropriate plan, you may want to consult with your tax and financial advisors. In any case, don’t wait too long. Time goes by quickly, and when you reach that day when you’re a “former” business owner, you’ll want to be prepared. This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

Energy

Last week, the House and Senate hosted a joint Energy Committee where we heard a presentation from the Chairwoman of the Michigan Public Service Commission on the Michigan Energy Assessment report that was ordered by the Governor. I appreciate the work that was put in by the MPSC; however, serious concerns were raised by the Committee about the supply of energy needed to ensure that Michigan residents have continued access to safe and reliable power. An issue that has turned political is Line 5. In the Committee, the question was asked what the contingency plan is for residents of Northern Michigan and the U.P. in case the Governor and Attorney General rip out Line 5. The answer – trucks. Back in 2013, Line 5 and several other service lines were shut down due to maintenance. During this time, the price of propane soared to well over $5/gallon. Like many residents of our community, my home is heated by propane because I don’t have access to natural gas. If the price of propane jumped as high as $5/gallon, I don’t know how many of our residents could afford to heat their homes. When proposals are floated to remove Line 5, they usually include a false narrative that renewable energy sources can fill in the gap left in Line 5’s wake right now. Diversifying our energy portfolio is important, but we aren’t there yet technology-wise for renewables to provide baseload power. Renewables are an answer to future energy demands, but right now, they aren’t viable to be a sole source of power for thousands of Michiganders. Michigan’s energy needs shouldn’t be a political game. I look forward to continuing my work as the Vice-Chair of the Energy Committee to ensure that our State has a robust and diverse supply of energy and that we continue to innovate and embrace new and emerging technologies. If I can ever be of assistance to you, you can reach me at 517-373-1403 or PaulineWendzel@house.mi.gov.

‘Be a Senator for a Day’ essay contest

One of the joys I get out of serving as your state senator is to be able to connect with young students throughout Southwest Michigan.