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Entrepreneur Radio Interview

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11-03-2006

LEE MIRABAL, host: Entrepreneur Radio

LEE MIRABAL, host: Today, we welcome back an old friend, Hugh Bromma, with The Entrust Group. Hugh, welcome to the program and welcome back to WS Radio. It's nice to hear your voice.

Mr. HUGH BROMMA (The Entrust Group): Well, thank you very much. I appreciate it.

MIRABAL: So, tell us, does being an entrepreneur make our retirement planning options different than, say, an employee?

Mr. BROMMA: Absolutely. And what I say about that is, is that entrepreneurs have some capabilities as employers, if you will, that employees never have available to them, such as--

MIRABAL: Such as--

Mr. BROMMA: Well, like the individual 401(k) plan, which has a Roth feature into it where the entrepreneur not only is the employer but also the employee. And therefore the employer, or the entrepreneur who sets up this kind of a plan, gets a tax deduction for the contributions that they make, and also as individuals can make Roth contributions,which are significantly more than a Roth IRA is and have a larger amount of capital to work with in terms of investment.

MIRABAL: So, explain it to us. A lot of us are small business owners.  Explain exactly what you mean by the Roth feature. A 401--well, let's start with 401(k)'s.

Mr. BROMMA: Yes.

MIRABAL: Let's say a straight 401(k) for an entrepreneur.

Mr. BROMMA: Yep.

MIRABAL: Is that the same as an employee?

Mr. BROMMA: What it is, is that the 401(k) plan is one that allows individual employees to make deferrals to a profit-sharing plan.  And what happened is, is a lot of people misinterpreted what a 401(k) is.  It is only a profit-sharing plan that has the ability for one to put money away for themselves as an individual as well.

MIRABAL: And the Roth feature.

Mr. BROMMA: The Roth feature's great. Something that came in this year, and what it allows the employee--in other words, you're the employer and you're the employee at the same time--

MIRABAL: Right.

Mr. BROMMA: It allows you to make a deferral of up to $15,000 into an after-tax account for the 401(k) portion.

MIRABAL: Woo-woo!

Mr. BROMMA: Yeah. And if you're 50 or over, you get an additional $5,000 that you can make in that--

MIRABAL: Oh!  Double woo!

Mr. BROMMA: Yeah.

MIRABAL: That's good.

Mr. BROMMA: And there's no salary cap. So you can make as much money as you want, and you're still eligible to make those kinds of deferrals.

MIRABAL: Hugh, are there any new rules regarding how much money an entrepreneur can put away?

Mr. BROMMA: Yeah, the same thing. On the individual(k)it's still $44,000 for this year and it gets ratcheted up every year.

But an entrepreneur should also not disregard the capabilities. You want to put a lot of money away is the defined benefit plan. And the defined benefit plan allows you, depending on your age, to put a lot of money away, up to 150 percent of compensation under the right circumstances.

MIRABAL: Now, what do you mean? Is this for sole proprietors, also?

Mr. BROMMA: It is.

MIRABAL: And what do you mean, "age-specific?"

Mr. BROMMA: Well, what happens is that a defined benefit plan is one where you define exactly how much money you want to get out for the rest of your life at a particular point.

So the older you are, the more money--if you haven't already done some tax planning, and so forth--the older you are, the more money you can put away because you have less time in which to put money away, earn income on it, and then be able to take that out of your plan to live on a retirement basis.

MIRABAL: So, an entrepreneur who's of an age.

Mr. BROMMA: Yep.

MIRABAL: Let's say, over 55, maybe in their early 60s...

Mr. BROMMA: Yep.

MIRABAL: ...and they're single; I'm going to work for 10, 15 more years.

Mr. BROMMA: Yep.

MIRABAL: It's never too late. Is that what you're saying?

Mr. BROMMA: Exactly. It isn't. It's just a matter of having enough money to put away into the account.

MIRABAL: I understand you have got a new book coming out.

Mr. BROMMA: I do!

MIRABAL: What is that book?

Mr. BROMMA: It's "How to Invest in Real Estate Using Your IRA or--and 401(k)."

MIRABAL: Wow!

Mr. BROMMA: Yep.

MIRABAL: Now, that's interesting.

Mr. BROMMA: Yeah. It's a fun little book. I had another book called "How to Invest in Real Estate and Pay Little or No Tax."

This one is specific to IRAs and 401(k)'s, and it actuallyprovides individuals with information that says, 'What's--what kind of plan choices are there?  Would I have a 401(k) plan?  Would I have a Roth?  Would I have a traditional?  Do I--what are the comparisons?  Where am I going to save the most tax dollars?' And that's what that book is oriented to.

MIRABAL: And where can we find the book?

Mr. BROMMA: Amazon.com.

MIRABAL: Terrific. And your Web site is theentrustgroup.com. And that's spelled The Entrust, E-N-T-R-U-S-T, group.com. And, Hugh, thank you so much for coming on the program today.r. BROMMA: Well, thank you so much.

MIRABAL: I certainly appreciate it. Thanks.

Mr. BROMMA: Thank you, and I appreciate the opportunity.