Return to Transcripts main page
CNN Saturday Morning News
Private 401(k) For Self Employed
Aired December 28, 2002 - 07:54 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CATHERINE CALLAWAY, CNN ANCHOR: Well some 750,000 jobless Americans are waking up to a nightmare this morning. They lose their federal unemployment benefits today because of the expiration of a federal extension program. Now the temporary emergency unemployment compensation went into effect in March and that program usually goes into effect after a state-funded program expires, typically after 26 weeks.
The federal program extends unemployment benefits up to an additional 26 weeks. There may, however, be some hope for the three- quarters of a million Americans who lose their extended benefits today because President Bush has called on the incoming progress to further extend benefits retroactive to today's date.
MILES O'BRIEN, CNN ANCHOR: Which brings us to Clark Howard. And our in-house cheapskate. That's his name.
CLARK HOWARD, CNN POCKETBOOK PROTECTOR: Janet has a question for me about something new -- the individual 401k plan. You've heard of 401(k) plans at work. If you work for big companies you've got those plans that they give you choices about where you put your money and all of that -- how much of your money you put in. And in a company 401(k) plan, there are strict limits as to how much money you can put in each year.
But if you own your own business or you are self-employed, you're eligible for something known as an individual 401(k) plan that let's you shovel in more money than you can imagine into that plan each year and it allows you to lower the income and income tax you would have to pay the IRS for that year and then the money grows tax sheltered through the years just like your 401(k) at work.
The individual 401(k) plans are being pushed very heavily right now by some heavy commissioned companies -- they are not ready for prime time yet. If you are a real high income earner, your business is going great, and this is something you are dying to do, just give it a little more time till some of the low cost providers out there who can provide you with an individual 401(k) plan have theirs up and running.
But right now what's going to happen is you chase the tax benefit so much that you forget how much you're having to pay in commissions and fees to have that individual 401(k) plan. But for people who make a lot of dough, this thing is going to be cool. What do you do as an alternative right now you can do nearly no cost SEPS (ph) -- a simplified employee pension. You have some part-time income or you're self employed, doing a SEP is absolutely great and if you have some part time stuff you do on the side, and you have a 401(k) somewhere else, you know you can do both. You can do your 401(k) with your main employer and with your little side business you can still do a SEP. I love them.
O'BRIEN: All right, Mr. SEP Man Clark Howard, we love him. He's a frequent guest on our weekend shows. We invite you to e-mail questions to him and he'll answer them next time we get a hold of him and the e-mail is wam, of course wam@cnn.com -- send them along and we'll get them to Clark. Make sure you use a low cost Internet service provider. Let's go to break, shall we?
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
Aired December 28, 2002 - 07:54 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CATHERINE CALLAWAY, CNN ANCHOR: Well some 750,000 jobless Americans are waking up to a nightmare this morning. They lose their federal unemployment benefits today because of the expiration of a federal extension program. Now the temporary emergency unemployment compensation went into effect in March and that program usually goes into effect after a state-funded program expires, typically after 26 weeks.
The federal program extends unemployment benefits up to an additional 26 weeks. There may, however, be some hope for the three- quarters of a million Americans who lose their extended benefits today because President Bush has called on the incoming progress to further extend benefits retroactive to today's date.
MILES O'BRIEN, CNN ANCHOR: Which brings us to Clark Howard. And our in-house cheapskate. That's his name.
CLARK HOWARD, CNN POCKETBOOK PROTECTOR: Janet has a question for me about something new -- the individual 401k plan. You've heard of 401(k) plans at work. If you work for big companies you've got those plans that they give you choices about where you put your money and all of that -- how much of your money you put in. And in a company 401(k) plan, there are strict limits as to how much money you can put in each year.
But if you own your own business or you are self-employed, you're eligible for something known as an individual 401(k) plan that let's you shovel in more money than you can imagine into that plan each year and it allows you to lower the income and income tax you would have to pay the IRS for that year and then the money grows tax sheltered through the years just like your 401(k) at work.
The individual 401(k) plans are being pushed very heavily right now by some heavy commissioned companies -- they are not ready for prime time yet. If you are a real high income earner, your business is going great, and this is something you are dying to do, just give it a little more time till some of the low cost providers out there who can provide you with an individual 401(k) plan have theirs up and running.
But right now what's going to happen is you chase the tax benefit so much that you forget how much you're having to pay in commissions and fees to have that individual 401(k) plan. But for people who make a lot of dough, this thing is going to be cool. What do you do as an alternative right now you can do nearly no cost SEPS (ph) -- a simplified employee pension. You have some part-time income or you're self employed, doing a SEP is absolutely great and if you have some part time stuff you do on the side, and you have a 401(k) somewhere else, you know you can do both. You can do your 401(k) with your main employer and with your little side business you can still do a SEP. I love them.
O'BRIEN: All right, Mr. SEP Man Clark Howard, we love him. He's a frequent guest on our weekend shows. We invite you to e-mail questions to him and he'll answer them next time we get a hold of him and the e-mail is wam, of course wam@cnn.com -- send them along and we'll get them to Clark. Make sure you use a low cost Internet service provider. Let's go to break, shall we?
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
