Wealth Planning is the integration of lifestyle planning, asset protection and wealth transfer issues. It can seem a daunting, almost overwhelming task, especially if you are a self-employed agent. Financial decisions often rank among the most important life choices any person can make. They determine where your children will be able to go to college, when you will be able to retire, what kind of lifestyle you'll enjoy after retirement and the financial security you'll leave behind for your spouse or family.

As an independent agent you bear the sole responsibility for planning your own retirement. If saving as much as you can for retirement is a prime concern, a one-person 401(k) may be an appropriate choice for you.

Consolidation: All pre-tax balances of Keoghs, 401(k)'s, SEP IRA's, Traditional IRAs and other retirement plans may be consolidated under one retirement portfolio umbrella. Consolidation of the balances can provide greater investment control, reduction in costs, and simplification of statements.

Tax Deductions and Maximum Contributions: With a One Person 401(k) you are permitted to make profit-sharing contributions up to 25 percent of your compensation, subject to a $220,000 compensation cap in 2006. Plus, you may make an additional $15,000 salary-deferred contribution, and if you are over age 50 that amount increases to $20,000. The combination of profit-sharing and salary deferral contributions may not exceed $44,000 ($49,000 for people age 50+).

Maximum Contributions (2006)

Loans: The One-Person 401(k) plans allow owners to borrow up to 50 percent of their account balances, not to exceed $50,000, tax-free while SEP IRA's do not offer this feature.

With all of the retirement products available for self-employed individuals, why aren't more agents planning for their retirement years? Some real estate companies have even experimented with setting up retirement plans for their agents that enabled them through salary deferral to systematically set aside funds and offered company matching. Yet participation was very low. Industry leaders believe that this is due to lack of planning and that real estate professionals are so focused on building their businesses, and servicing the needs of their clients that they often neglect their own self interests.

One strategy is to find a financial advisor that is familiar with the real estate industry and who will take the time to discover your goals and concerns and discover where you would like to see yourself and your family in five, ten or twenty years. Reaching your goals requires a lot more than a hot investment tip or a smart trade. It means creating a sound financial plan -- a life plan -- one you'll stick to when short term worries and temptations threaten to cloud your judgment. Your financial advisor should discuss all of the options available to real estate professionals.

Has your Financial Advisor asked you what level of income you will require in retirement? He should be working closely with your CPA to coordinate estimated quarterly tax payments while also funding retirement plans. You should have savings projections with distributions that are integrated with social security.

It is critical to take the time to plan for your family's future. The real estate business is a fabulous profession that offers many wealth building opportunities. Finding a financial advisor who takes the time to know you, understand you, and gain insight into your needs and goals will help insure financial success by knowing that your financial future is secure. This will allow you the freedom to focus on growing your real estate business. The right financial advisor knows that planning for your future may take time, but the effort will be well worth it.

Citigroup, Inc., its affiliates, and its employees are not in the business of providing tax or legal advice. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any such taxpayer for the purpose of avoiding tax penalties. Tax-related statements, if any, may have been written in connection with the "promotion or marketing" of the transaction(s) or matters(s) addressed by these materials, to the extent allowed by applicable law. Any such taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor.

Published: September 28, 2006

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