Q.: I have a side business which has become quite profitable over the last couple of years. I heard that the self-employed may establish a "solo" 401(k) plan. Does this plan have any relationship to the 401(k) Plan offered by the city? Can you elaborate? A. C.
A.: You may contribute to the Deferred Compensation 457(b)/401(k) Plan of the City of New York and, at the same time, to a solo 401(k) Plan that you establish. Only two people may benefit from the solo 401(k) plan, you and your spouse or domestic partner. For additional guidance and investment of contributions, I suggest you use the Vanguard Group: 1-800-662-CREW.
CORONAVIRUS RELATED RETIREMENT BENEFITS
- Loan repayments from your favorite retirement plan may be suspended through July 15, 2020. Contact your plan for the requisite application form.
- Did you make your 2019 contribution to your NYCE Roth IRA? Your check must be received by the Plan's Administrative office by July 10, 2020. I suggest you get it there by July 1.
- 2020 Required Minimum Distributions (RMDs) are waived.
- You may be eligible for a Coronavirus-Related Distribution of up to $100,000. This is an aggregate amount among all your retirement accounts. If you qualify, you have until Dec. 31 to apply. The Deferred Comp website has an excellent chart furnishing the pros and cons of taking such a distribution. Please digest it and contact me prior to taking such a distribution. Caution: The sales-sharks see this as an opportunity to sell inappropriate commission-based investments. Do not fall for it.
It goes without saying that the state and city budgets are taking it squarely on the chin. Most of the calls I take during these days deal with the investment of supplemental savings via the 457(b)/401(k)/403(b) plans the city offers. Such calls deserve my individual attention.
That being said, the most anxious calls I entertain are from those who are lending their retirement savings to the city via the TRS 403(b) Plan. UFT members want to know if their 7 percent is guaranteed. Non-UFT members want to know if their 8.25 percent is guaranteed. I tell them that unlike the 5 percent interest they earn on their mandatory retirement savings inside of the TRS Qualified Pension Plan, the TRS 403(b) interest rates are not guaranteed by the State Constitution and may be reduced or eliminated by the city.
Mr. Frank is a fee-only Retirement Financial Planner and a retired city high school Teacher of Accounting. He can be reached by phone at (732) 536-9472, or via email at firstname.lastname@example.org.
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