How Realtors Can Invest for Retirement


Chike Uzoka

Realtors, I'm speaking to you right now!

As Realtors, Real Estate Agents & Real Estate Professionals, we're technically self-employed. If you’re like me and you transitioned from the corporate W-2 life, you expect your employer to tell you what your options are. Things are different over on the 1099 side though, so what options do we have to invest for later and how much can we contribute to each?

 

Let’s call it what it is, you don’t want to be a real estate agent for your whole life, right? If your answer is yes, then you’d need to build up one of two things. The first is people working for you. The second is money working for you. As an agent, it may be tough to have people working for you, you can always have money working for you though. So, what should you do when your broker (the person who gets paid on your efforts before you do) doesn't offer any options for you to save & invest?

 

Here are a few options we have: 

 

Name? ROTH IRA

Who can contribute?

You, if you are single and earn below $144,000, or married and earn below $208,000 for the 2022 tax year.

How much can I contribute?

You can contribute $6,000 for the year, and $7,000 if you are older than 50. This limit goes for Traditional IRAs as well. Rollover money from other accounts into this one are not limited.

How does the IRS treat my money going in, during, coming out?

Since your money going in has already been taxed, and is tax-deferred while in the account, as long as you stick to the rules (age 59 ½ before taking contributions), all of that gain and compound interest is yours. You are 100% vested in (aka, have ownership of) all of your ROTH funds.

 

Name? SIMPLE IRA (Savings Incentive Match Plan for Employees)

Who can contribute?

You, if you have less than 100 employees and are not offering any other retirement plans. If so, you must contribute either 2% non-elective (aka, mandatory for you) or 3% matching what your employee contributes.

How much can I/we contribute?

You can contribute (aka, elect to defer) up to $6,100 for the 2022 tax, if your employee earns the maximum $305,000 for the year. Your employee can contribute up to $14,000 for the year and an extra $3,000 if they are over the age of 50.

How does the IRS treat my money going in, during, coming out?

Since your money going in has not been taxed, you can deduct it. Your employee’s money has not been taxed and is tax-deferred while in the account, so they have to pay tax when they take distributions after the age of 59 ½. If before 59 ½, tack on a 10% penalty. If within the first two years of starting it, that extra tax is 25%. Your employee is always 100% vested in the account funds.

 

Name? SEP IRA (Simplified Employee Person)

Who can contribute?

If you are self-employed or have employees, and you set one up, you must contribute.

How much can I contribute?

You can contribute the lessor amount of either 25% of your/your employee’s salary, or $61,000 for the 2022 year for all eligible employees, including you.

How does the IRS treat my money going in, during, coming out?

Since your money going in has not been taxed, you can deduct it now and pay taxes on it later. Your employees will have to pay tax when they take distributions as well after the age of 59 ½. If before 59 ½, tack on a 10% penalty. Your employee is always 100% vested in the account funds.

 

Name? Solo 401(k)

Who can contribute?

You (and your spouse, if you love them enough)

How much can I contribute?

Since it’s just you (aka, employer AND employee), you can contribute both 100% of your earned income, up to $20,500, or $27,000 if you’re older than 50, for the 2022 tax year, AND up to 25% of your earned income. Total contribution for the year cannot exceed $61,000.

How does the IRS treat my money going in, during, coming out?

Since your money going in has not been taxed, you can deduct it now and pay taxes on it later. Good thing is you won’t pay taxes every year, because much like most retirement plans, it’s also tax-deferred. If you have to take a distribution before 59 ½, tack on an extra 10% penalty.

 

With more options than you thought you had, are you not sure which one is the best one for you? No worries, click below to discuss your options!

 

Speak with Chike About My Options

About the Author....

Chike Uzoka is a Social Entrepreneur & Your Money Guy.

When I'm not working with a client or training someone on my team, I'm somewhere enjoying sweet plantains, working on my classic BMWs, or getting ready to catch a flight!