Do you have income from self-employment? You may use this income as a source to fund a special IRA known as a Simplified Employee Pension or SEP-IRA. You as the employer contribute to your SEP-IRA. If you have employees, you must contribute to their SEP-IRA also. Employees (including you) may not contribute. The contribution limit is based on self-employment income, but may not exceed $56,000 for 2019.

Are you a candidate for a SEP-IRA? Contact me for additional details.

Are you contributing to the Teachers’ Retirement System Tax Deferred Annuity? The TDA is a pre-tax plan, which means you or your heirs are guaranteed to receive a future tax bill. TDA investors do not contribute to the city’s Deferred Compensation 457(b)/401(k) Plans because the City doesn’t offer a fixed-return option. Such decision making is short-sighted because the 7- or 8.25-percent return is not yours. It must be shared by the tax collectors at an unknowable income-tax rate you have agreed to pay, years if not, decades from now.

With that said, did you know that you can pay the tax now rather than putting it off to the distant future? A Roth after-tax contribution feature is offered by Deferred Comp and is yours for the asking. You’re making a big mistake if you’re not participating in the Roth feature of the Deferred Compensation 457(b) 401(k) plans of the City of New York.

For those who remain stubborn, may I suggest you invest half with the TDA and the other half with the Roth feature of Deferred Comp. Contact me to further discuss the Roth feature.

Did you know that state and city pensions are 100-percent exempt from the state and city personal income tax, while only the first $20,000 of income derived from supplemental plans like 457(b)/401(k)/403(b)/IRA is tax exempt, with amounts in excess of $20,000 taxable?

There is an exception to the $20,000 rule: It pertains to the 403(b) Plan of the Teachers’ Retirement System of the City of New York. All of the income received from the TRS/403(b) plan is exempt from the state and city personal income tax.

Over the decades, there have been all too many TRS/403(b) retirees who have paid state and city income tax on amounts in excess of $20,000. If you fall into this category, you are entitled to a refund. The UFT and the TRS need to inform their memberships as well as professional tax-preparers that 100 percent of TRS/403(b) income is, like the pension, exempt from the state and city personal income tax.

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

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