Retirement Planning Strategies

Plan choice

• Simplified employee pension (SEP) individual retirement account (IRA): employer-only, simple, fund by extended due date.
• Savings Incentive Match Plan for Employees (SIMPLE) IRA: ≤ 100 employees; deferrals + required match.
• Solo 401(k): employee deferral + employer profit share — highest for solo owners at moderate income.
• Defined benefit or cash balance: largest deductions for older high earners.

Traditional vs Roth

Traditional if today's rate > retirement rate; Roth if lower. From 2026, high earners' catch-ups must be Roth.

Roth tactics

Conversions in low-income years · backdoor Roth (watch the pro rata rule) · mega-backdoor · 5-year clock per conversion.

Distributions

• Required distributions at 73 / 75; qualified charitable distributions at 70½.
• Blend withdrawals to fill low brackets; manage adjusted gross income (AGI) for Social Security, Medicare, and deductions.
• Net unrealized appreciation: in-kind employer stock → ordinary tax on basis only, gain later at capital rates.
• Inherited: spouse can treat as own; others 10 years.

Exam traps

• The backdoor Roth pro rata rule counts all traditional, SEP and SIMPLE IRA balances at year end — not just the account converted.
• Roth conversions can't be undone (recharacterized) since 2018.
• SIMPLE IRA withdrawals within the first 2 years of participation carry a 25% penalty, not 10%.
• SEP contributions must be made for all eligible employees at the same percentage of pay as the owner.