Retirement

         
         
         
                                Retirement
         
         
          73) An IRA substitute can build your retirement funds
          and give you a charitable deduction today.  A good
          choice is the deferred gift annuity.  In this
          arrangement you pay cash to a charity this year and get
          to deduct part of the payment.  The charity invests the
          cash and promises to pay you an annuity in the future,
          perhaps when you are 65.  The annuity usually is an
          annual fixed dollar amount for life or a period of
          years.  IRS tables are used to determine the present
          value of the annuity, and your deduction is the
          difference between your cash payment and the present
          value of the annuity.  The longer the time between your
          payment and the annuity starting date, the greater is
          your current deduction.  When you receive annuity
          payments, part of each payment is a tax free return of
          your principal and the remainder is taxable income.
          The rate of return on your annuity is determined at the
          time of your contribution and varies with your age and
          the charity you select.  Many charities use a Uniform
          Gift Annuity Rate to determine your return, while
          others offer a different rate.  The usefulness of a
          gift annuity often depends on the rate of return, so
          check with several charities before making a decision.
          (Most established charities offer gift annuities, but
          you have to ask about them.)  Also check the minimum
          payment; it usually is higher than the IRA maximum of
          $2,000.  Another point: You must make the payment by
          December 31 to take a deduction this year; you can't
          wait until April 15 as you can with an IRA.
         
          74) Your business can increase the Social Security
          benefits your non-working spouse eventually receives.
          A surviving spouse with lifetime earnings that aren't
          substantial enough to trigger Social Security payments
          will receive between 37 1/2% and 50% of the working
          spouse's retirement payments.  But suppose you make
          your spouse a partner in the business right now.  There
          would be little or no effect on your current federal
          income taxes, but your spouse as a partner would now
          have self-employment income.  That income would count
          towards establishing your spouse's independent Social
          Security retirement payment to supplement yours.  This
          strategy could result in increased self-employment
          taxes now since both you and the spouse could be liable
          for the maximum payment.  This treatment can be reduced
          by making the spouse a less than 50% partner and by
          continuing the partnership only long enough to qualify
          for the maximum Social Security payout.  But you might
          find that increased self-employment taxes now are worth
          what might eventually be received in Social Security
          benefits.
         
          75) You can still borrow now to fund your IRA.  The
          final tax overhaul package allows this.  You can either
          get a personal loan or an advance against your credit
          card.  The money then can be deposited in an IRA, and
          the deduction can be taken if you qualify for it.  In
          addition, the interest charged is an investment
          interest expense, which means it is deductible to the
          extent of your investment income.  Interest that you
          cannot deduct this year is carried into future years
          until you have enough investment income to offset it.
         
          76) "Paired" retirement plans maximize your benefits.
          A small business owner can maximize benefits and
          protect cash flow by pairing two retirement plans.
               The best approach for a business is to start with
          a profit sharing plan.  This plan does not require
          annual contributions.  So you can make a large
          contribution to the plan in a good year and make a
          lower or no contribution in bad years.  The maximum
          contribution is the lower of 15% of salary or $30,000
          per employee.
               When cash flow becomes more predictable or seems
          to have a floor, you can set up a defined contribution
          plan.  This requires you to make an annual
          contribution.  You set the amount of the annual
          contribution when you create the plan by stating the
          percentage of salary that will be contributed per
          employee.  It can range up to 25% of salary or $30,000,
          whichever is less.
               Many business owners find the ideal pairing is to
          set up a defined contribution plan with a contribution
          rate of about 10% of salary.  Then additional
          contributions of up to 15% of salary can be made to the
          profit sharing plan.  So in the best years 25% of
          salary will go into the retirement plan.  But in bad
          years the business is obligated to contribute only 10%
          of salary.  You can set a lower figure for the defined
          contribution plan if you think there might be years
          when meeting the 10% figure will be tough.
               By pairing retirement plans you ensure maximum
          contributions in the good years and allow the business
          flexibility for years when cash is tight.
         
          77) Smaller businesses can get the benefits of pension
          plans without the high costs.  You are allowed to set
          up a Simplified Employee Pension Plan.  A SEP is simply
          an IRA account to which the employer makes
          contributions according to a written formula.  The
          contributions must comply with the nondiscrimination
          rules.  The employee is allowed to make whatever
          regular IRA contribution he or she would still be
          eligible for.
               In addition to relaxed maintenance and reporting
          requirements, an advantage of a SEP is that the
          employer does not have to make annual contributions.
          The contributions are made when the employer chooses,
          but when made they must be according to a formula that
          does not improperly discriminate among employees.  A
          disadvantage is that when an employee eventually takes
          money from the SEP, the distributions do not qualify
          for the five-year averaging allowed lump sum
          distributions from regular pension accounts.  But this
          should not be considered a great disadvantage since
          lump sum benefits generally are rolled over into an
          IRA, and that puts the benefits on an equal footing
          with SEP benefits.
         
          78) Some gold and silver investments can be included in
          IRAs.  The 1981 law prohibited IRAs from investing in
          collectibles and precious metals.  But the tax reform
          plan says that your IRA can purchase the new gold and
          silver bullion coins minted by the United States.  You
          still cannot put other forms of gold or silver or other
          collectibles in your IRA.  (The GoldPlan in idea #48
          can be included in IRAs.)
         
          79) U.S. law requires that assets in pension plans be
          physically held by a trustee in the United States.  For
          two products -- foreign currency certificates of
          deposit and Swiss annuities -- a service is available
          that will let you place these products in your U.S. IRA
          or pension account. 
               International Financial Consultants of Rockville,
          Maryland, using the services of the venerable Delaware
          Charter Guarantee and Trust Company, can provide the
          required custody and accounting services.  Delaware
          Charter was founded in 1899 and now manages over US$8.5
          billion in trust assets, the largest of any non-deposit
          U.S. trust company.  However, they will not offer their
          services directly, but only through intermediaries.
               Michael Checkan and Glen Kirsch of International
          Financial Consultants provide a service in which IFC
          handles all the year-end currency conversion accounting
          required by IRS rules, and Delaware Charter compiles
          the annual reports to the IRS.  They are well known in
          the financial newsletter industry and at one time or
          another have been recognized as a "recommended vendor"
          by many of the writers in the newsletter industry.  The
          principals, Michael Checkan and Glen Kirsch have been
          in the foreign exchange business for a combined total
          of 50 years. 
               For further information write to International
          Financial Consultants Inc., Suite 400A, 1700 Rockville
          Pike, Rockville MD 20852 and ask for information on the
          offshore retirement account service.