When is too old to start a Roth IRA?
Dear Dave: Iíd like for my husband and I to begin investing. We have nothing saved right now, and our household income is just $25,000. Weíll have our house paid off later this year, but even though weíre both just 40 he says itís too late in life to start investing. How can I convince him? — Margaret
Dear Margaret: Too late? What does he want to do, dig a hole in the backyard and wait for the end? Letís do some figuring.
Right now, fully-funded Roth IRAs would be $4,000 each, or $8,000 a year combined. Youíd have to tighten your belts on your income until the house is paid off, but if you start now you can end up with more than a million dollars by the time youíre both 70. Does that sound too late to you?
I think your guy has fallen for the tired old line that the working man canít get ahead. But we just proved that with a little work and little saving he can.
You guys can retire wealthy, Margaret. Donít give up! — Dave
Compensating sales reps
Dear Dave: Iím starting a business and have a question about compensating my sales people. What type of plan do you think is best? Is a full commission model better or would a base salary with a commission bonus structure work? — Rob
Dear Rob: I have a bunch of folks here at my company who do sales and marketing for me. Depending on what they are selling and what the lead-time is, I put them on a ďSurvival for AllĒ plan.
These folks have a base compensation, or draw, thatís small. I make sure they have enough to get by each month, but if they want to make any real money they have to get out there and make something happen.
In my case itís a non-refundable draw because I donít borrow or loan money. Its non-refundable meaning that if they crash and burn and after 90 days and havenít made a dime, then I eat that amount. This makes me hire more carefully to make sure I get quality folks working with me. This is my favorite way to pay employees. I would even put the receptionist on straight commission if I could figure out a way to make that work!
I had a salary job once for about three weeks and it drove me nuts. I have to be able to set my own limits as to how much I make. In your new business, you may have to deal with someone who would panic in a straight commission setting, and that may affect performance. Some people canít perform unless they are relaxed, so the base plus commission structure gives them a bit of security.
Other options are available, but you have to pick the one you are comfortable with. Just make sure it helps create an atmosphere in which your people can excel! — Dave