HomeBusiness CenterMoney ManagementRetirement Plans for Family Child Care Providers
Retirement Plans
for Family Child Care Providers

  
I.   Regular IRA

  • Can set aside up to $5,000 tax-deductible contribution per year ($6,000 if age 50 to 70- ½)
  • Will pay tax on contributions and interest earned after age 59 ½
  • 10% penalty for withdrawing contributions or interest before age 59 ½
  • Can set up by April 15
  • If single and not covered by an employer’s retirement plan – always eligible. Otherwise may or may not be eligible depending on family income

II.   Roth IRA (as of January 2009)

  • Can set aside up to $5,000 (non-deductible) per year ($6,000 if age 50 to 70 1/2)
  • Can withdraw contributions tax free after 5 years
  • Can withdraw interest tax free after age 59 1/2
  • Minimum distribution rules at age 70 1/2 do not apply
  • Cannot contribute more than $5,000 per person, per year to a Roth IRA or regular IRA or non-deductible IRA combined
  • To contribute to a Roth you must earn less than $114,000 (unmarried) or $166,000 (married, filing jointly)

III.   Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)
        (as of January 2009)

  • Can set aside up to $10,500 (deductible) per year of net income
  • Operates like a regular IRA
  • Must offer same plan to employees earning $5,000 in any of two preceding years
  • 25% penalty for early withdrawal in first two years
  • Cannot make contributions to a SIMPLE and SEP in same year
  • Must set up 90 days before end of year
  • No income level, everyone is eligible

IV.   Simplified Employee Pension (SEP)

  • Can set aside up to 18.59% of net income per year
  • Operates like a regular IRA
  • Must offer same plan to employees if employee is over 21 years old, has worked for you in 3 of past 5 years and has earned at least $450
  • Can set up by April 15
  • No income level, everyone is eligible

This handout was produced by Think Small (www.thinksmall.org).

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