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Steve Windhaus Ask the Small Biz Adviser

Retirement savings, health insurance and tax savings

Dear Small Biz Adviser:
My husband has a small business and a child. He doesn't have any kind of retirement plan, and I have been urging him to follow up on an IRA plan. He's interested, but isn't a financial person at all; he lives from paycheck to paycheck. I'm just now taking over a mess of finances for him, and I'm trying to get the ball on the right track.

With money being very tight and our tax bills outrageous, should we start with an education IRA? In addition to his child, we have a 4-year-old son. Also, I have heard of health insurance for small businesses and rates that are affordable, but I haven't found a plan under $500. I'm currently covered under an insurance plan at my job, at a cost of $220 for my son and me. Do you know where I can find some information?
Thank you a bunch,
Home Accountant

Dear Home Accountant:
Your questions are on specific ways to solve your retirement-savings and health-care-coverage needs, and we'll certainly look at your options here. But I'd also like to suggest a variety of strategies you might find useful in dealing with the financial needs of your family and your husband's small business.

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Overall, I get a strong feeling that you and your husband have never addressed your combined finances as one unit of income and expenses. I don't know what agreements, stated and otherwise, you reached at the time of marriage, but your inquiry suggests an intention to consolidate matters for the benefits of the total family, both parents and the two kids, so we'll look at that, too.

IRA options
First, let's look at retirement accounts. The tax laws provide for several different plans, for both individuals and small businesses, that can help cut tax bills. Individual taxpayer options include the traditional and Roth accounts. Business owners can look into a Simplified Employee Pension (SEP) or a SIMPLE IRA.

For details on each of these accounts, review my recent column on IRAs for the self-employed. In addition, Bankrate expands on the definitions, advantages and disadvantages of the various IRA options in the article, Individual Retirement Accounts: something for everyone.

Since you have children to consider, you are wise to explore the tax-deductible incentives of an education (Coverdell) IRA. This savings vehicle gets even better in 2002, with the amount that can be contributed going to $2,000 and the range of expenses for which it can be used expanding. provides comprehensive information on this plan. However, I highly recommend that you consider this investment in the overall scheme of your family's financial situation, both short-term money needs and long-term savings plans.

Health care and the small company
As you well know, for an entrepreneur with a family, getting health insurance coverage can be difficult. It is a continual battle to find an affordable plan that addresses coverage options, premiums, deductibles and availability of local health care providers who accept the plans.

There are so many Internet sites offering direction or a sales pitch. Bankrate's story on health insurance options for the self-employed provides several suggestions on how to fill gaps in coverage. You also should check out's insurance channel, and a quick search of the Internet turned up the following sites that offer information on entrepreneurial health care coverage:

  • is an online portal that provides a review of plans, companies, quotes, FAQs and information about medical savings accounts (an increasingly popular option).
  • The National Federation of Independent Business has long championed the causes of small business before Congress. Membership in this nonprofit allows access to a number of health plans at rates advertised as discounted.
  • U.S. Insurance Directory is not exactly a low-keyed site. Pop-under ads abound, but it offers more than 650 Web site listings alphabetized by state.

Of course, many chambers of commerce offer group rates for health, dental and optical plans. Check with your local chamber office.

Family finances
Finally, I must broach the issue of your overall family finances. As I noted, I am not aware of your marital arrangement as it relates to money management, but why not consider including your husband and his son in the health plan at your job? It may prove more economical to the total household. It is certainly a common arrangement in many homes where one parent is employed and the other is self-employed. That's what we do in our household. The cost savings simply cannot be beat.

In conclusion, if you are still confused or uncertain, it may be best to seek the advice of a financial consultant or an agency that specializes in these family-finance issues. An excellent example is the locator service of the National Foundation for Credit Counseling. This is not to suggest you are in financial trouble now, but they may provide an independent, outside solution you just may need at this time.

Regardless of the decision, I wish the best to all four of you.

-- Posted: Jan. 29, 2002

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See Also
How couples maximize health insurance benefits
Handling entrepreneurial health care issues

Credit lines can ease cash-flow woes

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