TIAA-CREF has finally come through! You may have been following the saga. If not, here’s the short version: In order to reduce my tax liability from self-employment income, I wanted to open a SEP IRA. The SEP IRA lets you contribute tax-free beyond the Traditional/Roth IRA limit, but only as an employer. I employ myself and generated several thousand dollars last year, so I qualify.
There are more details about SEP IRAs here, but basically I was allowed to invest up to 25% of my income or $42,000, which ever amount is less. Needless to say, I didn’t invest $42,000. In fact, I only invested $858, but it was enough to turn my remaining 2005 tax liability into a tax refund.
I applied for the account in March and my application was received on time by TIAA-CREF in order for my funds to be deposited via EFT on April 7. I tried to leave enough time before the tax deadline (April 17) just in case I ran into problems.
Ran into problems I did. I think it’s just attributable to the fund company’s backlog during tax season, but they didn’t get around to funding my account. I called several times as I mentioned in previous posts, and I’m happy to report that today, the account was finally funded. I was assured the contribution would be “coded” to qualify for the 2005 tax year, even though it is now past the tax deadline and I didn’t file for an extension.
I chose the TIAA-CREF International Equity Index Fund (TRIEX) to increase my exposure to international stocks as I felt that sector could use a little boost in my allocation.
Throughout 2006, I will continue to contribute to the SEP IRA on a “once-in-a-while” basis. I want to make sure I don’t go over the limit (25% of self-employment income). I was spurred on to look into the SEP IRA account to reduce my tax liability after reading two posts on Blueprint for Financial Prosperity. Thanks, Jim!