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Nate Thomas is not quite ready to go all the way. For 16 years, the semiretired entrepreneur has been operating Quality Impressions, a Durham, North Carolina-based producer of advertising specialty items. Says Thomas: “I’m still enjoying [the business], but I’ve reached the stage where I’ve cut back a little on the work I do. Now I have to decide whether to sell the company or take in a younger partner.”
Whether the vigorous 67-year-old Thomas continues to work or sells his enterprise will be his choice. Unlike many business owners and professionals, he has prepared for his post-employment life, designing options through some rather sharp preretirement moves. For one, he transferred his retirement account from his former employer into a rollover IRA, where his money has continued to grow, tax free, for the past three years. Investing in Janus Worldwide Fund (JAWWX), American Century Income & Growth Fund (BIGRX), Managers U.S. Stock Market Plus (MGSPX), among other mutual funds, he has amassed enough to maintain his current lifestyle when he decides to stop working. While building up the value of his enterprise, he structured a simplified employer pension (SEP) plan, to which he continues to contribute 15% of his income, and, through investments in Deutsche/BT International Equity Fund and Weitz Partnership Value Fund (WPVLX), has the money to enable him to travel. Thanks to a recent federal law that wipes out the “earnings penalty” for workers between the ages of 65 and 69, Thomas is entitled to his full Social Security benefits no matter how much he earns. How much do these benefits come to? Twenty-five percent of his income. (Workers 62 to 64 years of age still face an earnings penalty, however. In 2000, they’ll lose $1 of Social Security benefits for every $2 of earnings over $10,080.) So, when Thomas finally stops working, he’ll be able to live on his Social Security benefits, proceeds from the sale of his business, and his retirement accounts.
Indeed, Thomas has methodically assembled the building blocks of a bountiful retirement. Unfortunately, too many entrepreneurs and executives don’t prepare for the day when they will no longer be full-time members of the workforce. And many of us feel that we will never be ready to make that move: According to a survey conducted by the Savings Education Council last year, 24% of all workers were not confident that they were prepared to retire comfortably.
But you don’t have to be one of them. To help you prepare for your golden years, be offers a basic primer on the tax-deferred vehicles available to you. If used properly, they will provide you with the funds that will enable you to retire in comfort. Some may prove to be more traditional, while others require you to choose hard-working investments for your long-term financial objectives.
Social Security. OK, we know that you will need more than your Social Security benefits to retire. And while it may not constitute an active investment, folks like Thomas have used these benefits to supplement