THE SELF-EMPLOYED NEED They come to us for business advice, so why not retirement advice? As the number of entrepreneurs grows, CPA firms can grow with them by providing needed personal financial planning advice. There are about 16 million workers in the United States who consider themselves to be self-employed now, up from around 13 million in mid-2020, according to the Pew Research Center. While the COVID-19 pandemic primed this growth, both in a positive sense (perhaps the “Great Resignation” lit a fire under the feet of would-be entrepreneurs) and in a negative sense (as businesses let go of thousands of W-2 employees), I believe we’ve entered a period of permanently high entrepreneurship moving forward, even as the economy recovers from its pandemic ills. But what of the retirements of these go-getters? Howmany employer-sponsored retirement accounts have they left behind, and how much of their personal savings has gone into starting their new ventures? I’ve often felt that we CPAs and CPA personal financial planners can make the most impact in the lives of the self-employed and small business owners—and now we have a bigger market than ever to serve. So, how can we as strategic advisors ensure these entrepreneurs meet their long-term financial goals? Assuming that your self-employed clients are already well on their way to covering the basics—think the proper legal and tax structures for their businesses, sound budgeting and cash f low management, and risk management (like business/liability and long-term disability insurance)—you should reinforce the benefits of retirement planning. There are five primary retirement programs available to the self-employed: IRAs, SEP-IRAs, SIMPLE IRAs, solo 401(k) plans, and defined benefit pension plans. Each of these vehicles has different mechanics, pros, and cons to consider. Here are some basics to take into consideration when discussing them with your clients. Flexibility Needs The planning and selection of one or more retirement programs for a self-employed individual should be done in such a way that they establish meaningful holdings in three types of accounts: pre-tax, after-tax, and tax-free. The goal here is to create financial f lexibility for when the time comes to utilize these assets, whether that be for living expenses or another venture. The simple fact is that our tax and financial planning opportunities are greatest when clients have these three pools of assets to access. For example, you might recommend a withdrawal of pre-tax funds in excess of your client’s required minimum distribution (RMD) BY MARK J. GILBERT, CPA/PFS, MBA, REASON FINANCIAL ADVISORS RETIREMENT PLANS: CPAS CAN HELP I S S U E 4 , 2 0 2 2 22 nebraska cpas
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