"All of you. Selecting the proper type of plan and plan structure is very important. It'll pay big dividends in the long run to make a small investment in expert advice be-forehand."
"I know you're eager to move on, Roy, but you may want to mention SEPs," James Murray intervened.
"SEP stands for Simplified Employee Pension. Basi-cally, that's a pension plan in which both the employer and employees make deductible contributions to individuals' retirement accounts—IRAs. Deductions are restricted to fifteen percent of income or thirty thousand dollars—again, whichever is less. SEPs involve less paperwork than Keoghs, a drawback to Keoghs that I should have mentioned, and are usually less expensive to set up. The SEP contributions, though, with the fifteen percent maximum, are potentially not as high.
"To determine which plan is best for you, guess what you do?"
"Seek the advice of a professional," we chimed in unison.
"I've saved the most important lesson for last. As you know, the vast majority of people are not self-employed and therefore can't set up either a Keogh plan or a SEP. How do these people set out to create a pool of capital to augment their Social Security benefits and pension checks, if any?
"For most Americans, the best choice for retirement saving is the 401(k) plan."
"Hey, I'm pretty sure we have one of those at work," Tom piped up. "But I'm not sure I know exactly what it is."
"Thanks Tom," Roy nodded. "Once again you've un-wittingly served as a good example of a mistake millions of Americans make."