Jim came to us wondering if there was a way he and his wife could contribute to their IRAs using money he had earned as an independent contractor in the gap between practicing at two hospitals.  He had changed employers at the start of the year and, as typically the case, there is a one-year waiting time before he would be eligible to contribute to his new hospital’s retirement plan.  What was confusing was he had heard two conflicting opinions on whether or not he could do this, and he just wanted a third opinion.  Also, like many other people, he had a longer-term question of when he and his wife could reasonably expect to retire.  Actually, this was a multi-faceted question, a balance between three factors — time to retirement, their present savings, and the retirement lifestyle they’d like.

    After looking into his tax returns and learning more about his situation, it looked to us to not be so much a question of whether or not they could contribute to their IRAs, but an opportunity to consider a third option that solved several problems at once.   Since he had self-employment income, why not set up a solo 401(k) plan that would shelter many multiples of what they could contribute to their IRAs?  Solo 401(k)s are neither difficult nor expensive to set up (compared with regular employer 401(k) plans, subject to ERISA laws).  Used in combination with IRAs, they also provide great vehicles for carrying out more advanced tax strategies.

    We started with a collaborative look at their longer-term goals and deeper-held values.  The result has been an investment plan designed to meet these objectives, including their growing family’s financial goals.  It also gave them the opportunity to look squarely at the adjustments needed to accomplish these and set up a comfortable retirement lifestyle for many years to come.

    We find this happens often in our small practice, that what starts out as a simple tax question results in setting up a holistic plan that includes, not just a series of tax-saving strategies, but a larger plan that addresses their individual risks associated with health, insurance, estate planning, as well as smart portfolio management.   Perhaps the greatest end-result, though, is the opportunity for people to look at the very core of their relationship with money, and to start to center their financial lives around their most important values.  Truly, we find this to be the most rewarding aspect of working with our clients.