In this issue of MOR Investing, see how small business owners and those that are self-employed can start the year off right by reviewing or implementing a retirement plan for their employees and themselves. Also, keep in mind there is still time to make contributions to your IRA or Roth IRA for tax year 2011. And now is a great time to get a jump on saving for your child’s college education. Get off to a great start in 2012 with Morgan Keegan!
Retirement Plans for the Self-Employed and Small Businesses
Whether you are self-employed or own a small business, you play an important part in how you and your employees can save for the future. The right retirement plan can help you and your employees build a nest egg and provide significant tax advantages for your business and your employees. Morgan Keegan has the tools and know-how to help you get a retirement plan in place. And there are a number of plans to consider.
Types of plans
Retirement plans are usually either IRA-based (like Simplified Employee Pension plans, or SEPs, and Savings Incentive Match Plan for Employees, or SIMPLE IRAs) or "qualified" (like 401(k)s, profit-sharing plans, and defined benefit plans). Qualified plans are generally more complicated and expensive to maintain than IRA-based plans because they have to comply with specific Internal Revenue Code and ERISA (the Employee Retirement Income Security Act of 1974) requirements in order to qualify for their tax benefits. Also, qualified plan assets must be held either in trust or by an insurance company. With IRA-based plans, your employees own (i.e., "vest" in) your contributions immediately. With qualified plans, you can generally require that your employees work a certain numbers of years before they vest.
Which plan is right for you?
With a dizzying array of retirement plans to choose from, each with unique advantages and disadvantages, you'll need to clearly define your goals before attempting to choose a plan. For example, do you want:
- To maximize the amount you can save for your own retirement?
- A plan funded by employer contributions? By employee contributions? Both?
- A plan that allows you and your employees to make pretax and/or Roth contributions?
- The flexibility to skip employer contributions in some years?
- A plan with lowest costs? Easiest administration?
The answers to these questions can help guide you and your Morgan Keegan financial advisor to the plan (or combination of plans) most appropriate for you.
SEPs
A SEP allows you to set up an IRA (a "SEP-IRA") for yourself and each of your eligible employees. You contribute a uniform percentage of pay for each employee, although you don't have to make contributions every year, offering you some flexibility when business conditions vary. SEPs have low start-up and operating costs and can be established using an easy two-page form. Most employers, including those who are self-employed, can establish a SEP.
SIMPLE IRA plan
The SIMPLE IRA plan is available if you have 100 or fewer employees. For this plan, you must either match your employees' contributions dollar for dollar—up to 3% of each employee's compensation--or make a fixed contribution of 2% of compensation for each eligible employee.
SIMPLE IRA plans are easy to set up. You fill out a short form to establish a plan and ensure thatSIMPLE IRAs are set up for each employee.
Profit-sharing plan
Typically, only you, not your employees, contribute to a qualified profit-sharing plan. Your contributions are discretionary—there's usually no set amount you need to contribute each year, and you have the flexibility to contribute nothing at all in a given year if you so choose (although your contributions must be "substantial and recurring" for your plan to remain qualified). The plan must contain a formula for determining how your contributions are allocated among plan participants. A separate account is established for each participant that holds your contributions and any investment gains or losses.
401(k) plan
The 401(k) plan (technically, a qualified profit-sharing plan with a cash or deferred feature) has become a hugely popular retirement savings vehicle for small businesses. With a 401(k) plan, contributions go into a separate account for each employee and aren't taxed until distributed. Generally, each employee with a year of service must be allowed to contribute to the plan.
You can also make employer contributions to your 401(k) plan--either matching contributions or discretionary profit-sharing contributions.
401(k) plans are required to perform somewhat complicated testing each year to make sure benefits aren't disproportionately weighted toward higher paid employees, so you will need to work closely with your financial advisor to make sure your plan continues to meet the required qualifications.
Good planning is good business
Establishing a retirement plan can protect your and your employees’ future, and it can be an attractive benefit to potential new employees. Your Morgan Keegan financial advisor has the tools and the resources to help you choose the right retirement plan for your business. Talk to your Morgan Keegan financial advisor today.
The information is for illustrative and discussion purposes only.
Morgan Keegan does not provide legal or tax advice. You need to contact your legal and tax advisors for additional information and advice before making any investment decisions.
This service is provided as part of the brokerage services offered by Morgan Keegan and is not to be considered a financial plan within the meaning of the Investment Advisers Act.
© Copyright Broadridge Investor Communication Solutions, 2011
There’s Still Time to Feed your IRA
Another year has come and gone, but you still have time to make contributions to your traditional IRA and Roth IRA accounts for the 2011 tax year. IRA and Roth IRA owners can make up to $5,000 in contributions to their accounts for tax year 2011, and IRA owners age 50 and over can make up to $1,000 in additional contributions ($6,000 total). You may also be able to make additional contributions to your spouse’s IRA. Just know your IRA or Roth IRA contributions must be deposited by April 15 or, if mailed in, postmarked no later than April 15. Also, your ability to take a tax deduction on your Roth IRA contributions depends on your modified adjusted gross income. Tax filing extensions do not apply to your IRA and Roth contributions. Morgan Keegan does not provide tax advice and we strongly suggest that you contact your tax advisor for more information. If you would like to open a new IRA or Roth IRA, convert an existing IRA to a Roth IRA, or rollover a 401(k) to an IRA, please call your Morgan Keegan financial advisor.
Keep Up with Rising College Costs
The College Board recently released its Trends in College Pricing report that highlights college cost increases for the current academic year and trends in the world of higher education. While costs can vary significantly by region and individual college, the College Board publishes average cost figures based on its survey of 3,500 colleges across the country. The results indicate, once again, an increase in the cost of sending your child to college:
Public colleges (in-state students)
- Tuition and fees increased an average of 8.3% from last year to $8,244
- Room-and-board costs increased an average of 4.0% to $8,887
- Total average cost for 2011/2012 is $21,447
Public colleges (out-of-state students)
- Tuition and fees increased an average of 5.7% from last year to $20,770
- Room-and-board costs increased an average of 4.0% to $8,887
- Total average cost for 2011/2012 is $33,973
Private colleges
- Tuition and fees increased an average of 4.5% from last year to $28,500
- Room-and-board costs increased an average of 3.9% to $10,089
- Total average cost for the 2011/2012 year is $42,224
The "total average cost" figure includes tuition and fees, room and board, books and supplies, transportation, and a small amount for miscellaneous expenses. This figure is often referred to as the "cost of attendance."
Student Aid
The College Board noted that last year approximately 46% of all grant aid came from the federal government, 36% came from colleges, 9% came from state governments, and about 9% came from employers and other private sources. While student grants are the most desirable types of financial aid, since they don’t need to be paid back, the qualifications are very stringent and are in many cases based on need.
College Savings Plans
As the cost of attending college continues the rise, so does the need to have a solid college savings plan working for you. Your Morgan Keegan financial has information on investment options to help you save for your children’s education, including 529 plans, Coverdell ESAs and custodial accounts. Contact your Morgan Keegan financial advisor to learn more.
To read the Trends in College Pricing 2011 report, visit www.collegeboard.com/trends.
© Copyright Broadridge Investor Communication Solutions, 2011
Receive Your Investment Prospectuses and Proxies Online
Tired of those large, bulky prospectus and proxy mailings arriving in your mailbox at home? Now you can sign-up to receive semi-annual reports, 
annual reports, proxies, interims, newsletters, and prospectuses online. Broadridge Financial Solutions, the folks who handle delivery of prospectuses and proxies for most financial services companies, has introduced an easy-to-follow process for signing up for electronic delivery.
- Go to www.icsdelivery.com
- Click on “M” in the box on the upper right corner of the screen and select “Morgan Keegan”
- Enter your Morgan Keegan account number, email address and security information
Once you are done, Broadridge will immediately begin notifying you by email when materials are available for viewing online. The service is free and secure. For more information, please contact your Morgan Keegan financial advisor.
Important Messages for Morgan Keegan Account Holders
Order Flow Information
In compliance with industry regulations, the following disclosure regarding order flow is provided for your information: Client securities orders may be executed with Morgan Keegan itself, with other broker dealer market makers or through the exchanges on which the securities are listed. Several of these markets facilities offer automated execution services. Morgan Keegan’s order routing among the execution facilities depends upon various factors such as the identity of the security and the size of the order. Participants to whom Morgan Keegan directs orders execute such orders at the displayed national best bid or offer (NBBO) subject to order size and liquidity of the markets and also provide the opportunity for execution of limit orders at prices superior to the NBBO. Morgan Keegan may receive additional cash remuneration, known as order flow payment, in these transactions.
Routing Practices of Non-Directed Orders
U.S. Securities and Exchange Commission Rule 606 requires all brokerage firms, including Morgan Keegan, to make publicly available quarterly reports on the routing practices of non-directed orders. A non-directed order is an order the customer has not specifically directed Morgan Keegan to route to a particular venue for execution. Morgan Keegan is pleased to provide these reports to its clients in an electronic format accessible at www.morgankeegan.com, www.tagaudit.com or www.tta.thomson.com. Should you be unable to access this report electronically, a hard copy may be obtained by contacting your Morgan Keegan financial advisor. Rule 606 also requires all brokerage firms, including Morgan Keegan, upon customer request, to disclose the identity of the execution venue and the execution time for any order during the six months prior to the request. This information may be obtained by contacting your financial advisor.
Option Contracts Assignments/Exercises
Assignments/exercises for option contracts are being allocated using Random Computer Selection. This is the accepted industry standard. The Random Computer Selection will be derived from a computerized formula that will generate option assignments to customers’ accounts with short option positions. After the position is randomly selected, then the corresponding stock or cash settlement is transacted and the position is automatically delivered from the assigned customer account.
Investors in Auction Rate Securities
For anyone with an investment in auction rate securities or for anyone interested in investing in auction rate securities, we would direct your attention to the Morgan Keegan Web site for a description of Morgan Keegan's material practices and procedures regarding these auctions. A written description of these material practices and procedures is available upon request. If you have any questions regarding these securities or these procedures, please feel free to contact your financial advisor.
