Many of the professional musicians I work with are self-employed and don’t have access to a 401(k) or company retirement plan. Not surprisingly, saving for retirement is a not always a high priority for most young musicians. Still, getting an early start and saving regularly are the best path to financial security. What if you could get the government to pay you back $1000 when you invest $2000 into an IRA? Would that make it easier?
The SEP-IRA is a terrific accumulation tool for workers who are self-employed, have a family business, or who have earnings as a 1099 Independent Contractor. SEP stands for Simplified Employee Pension, but the account functions similar to a Traditional IRA. Money is contributed on a pre-tax basis, and then withdrawals in retirement are taxable. Distributions taken before age 59 1/2 may be subject to a 10% penalty.
The size of student loans has grown tremendously in recent years. Many college graduates are finishing school with $100,000 or more in debt, especially those who pursue graduate degrees. It is becoming a substantial problem, one which is impacting a whole generation’s ability to become wealthy. Perhaps for the first time in American history, our young people face a tougher road to prosperity than their parents did.
While some people view risk as synonymous with opportunity, the majority of us don’t enjoy the roller coaster ride of investing. Our natural proclivity for risk-avoidance can, unfortunately, become a deterrent in deciding how much we save. Without having specific goals, investors often default to a relatively low contribution rate to retirement accounts and other investment vehicles. They commit only how much they feel comfortable investing, rather than looking at how much they actually need to be saving in order to fund their retirement or other financial goals.
Goal Setting is a key step to the financial planning process, and helping clients achieve goals is the value I provide. Everyone would like to be wealthy, but that is not a goal. To me, it only becomes a goal when we can state a clear, tangible objective. So, if you’d like to retire, we’d calculate how to make that happen and develop a specific goal like “accumulate $2.1 million dollars by 2026.” That long-term goal gives us a timeline and dictates what we need to do each year and month to make your goal a reality. We can observe if you are on track and make adjustments as needed in the years ahead. The key step though is translating an ambiguous desire into a goal which is measurable.
If you’re a professional musician in the US, you likely received your annual statement from the American Federation of Musicians Employers’ Pension Plan in the past several weeks. The main purpose of the mailing is to verify your Covered Earnings from the past year. Professional musicians often have basic questions about the AFM Pension, in part, because the annual statement doesn’t tell you very much about your personal situation other than your reported earnings and the amount your employer(s) contributed to the pension fund.