MONEY & THE ENTREPRENEUR. Retirement options are many and necessary

FOR the self-employed, saving for retirement is like one of those bad-news, good-news stories: the bad news is you don't have a pension from a big corporation and you can't have a 401(k) to salt away pre-tax dollars. The good news is that Congress has provided a wider range of choices for savings and liberalized some of the rules for those choices. While putting something aside for retirement is important, there may be other alternatives to a specific retirement-savings program, like real estate. What's important is that something is put aside - especially from the good years - to prepare for the bad years and the years after retirement.

``I see a lot of young people in their peak earning years,'' says Laura Weiner, an accountant in Fort Lauderdale, Fla. ``One year they've got $300,00 coming in and a lot of money going out. Then they're barely making $50,000. They need to save for the lean times.''

For her part, Ms. Weiner has put real estate ahead of retirement. ``The first thing I advise young people to do is buy their principal residence first,'' she says. ``Then if there are additional funds available, they can start some kind of retirement program.''

Thomas Stanton, who owns his own asphalt blacktop company near St. Paul, Minn., has also tended to favor real estate over saving specifically for retirement. Because he puts asphalt around places like restaurants, stores, or office parks, he sometimes gets an early look at possible investment properties. He is now part-owner of a restaurant and several other properties.

Sooner or later, however, most people want some kind of dedicated retirement-savings program. The star of the entrepreneur's retirement-saving show is the Keogh plan. Basically, the Keogh lets you set aside up to 25 percent of earned income a year or $30,000, whichever is less. Unlike an individual retirement account (IRA), where Tax Reform scaled back the deductibility for many people, Keoghs are still fully deductible up to those limits.

It's not necessary to be completely self-employed to set up a Keogh, either. People who work full- or part-time for non-wage income, including salespeople on commission, free-lancers, or people who sell a product they make at home, are eligible to open a Keogh. They are also eligible - required, in fact - to make estimated tax payments every three months, unless the amount being withheld from their wage income covers 90 percent of the income and social security tax bill.

If you already have a Keogh, and it was set up before 1984, you might consider having it amended to take advantage of the more liberal limits on contributions.

If you don't have a Keogh, you can set one up for 1987 any time before the end of the year. All 1987 Keogh contributions have to be made during the calendar year. Unlike an IRA, you don't have until next April 15 to make Keogh deposits for this year.

The most common form of Keogh is the defined-contribution plan. Within this category are the profit-sharing plan and the money-purchase plan. As the name implies, contributions to the profit-sharing plan are based on the company's share of profits. If your company has a good year, you - and your employees, if you have any - can put more in the fund. Conversely, if you have a bad year, you can put less - or even nothing, if there are no profits - in it.

The other defined-contribution plan is called a money-purchase plan. This is usually used by small firms with some employees. It guarantees that a percentage of their pay will be put in the fund each year. While this provides employees with assured Keogh contributions, it locks the company into making those contributions, even if there aren't any profits. In fact, a money-purchase plan requires the owner of the company to put money into the employees' plan even if he or she can't put any in their own.

``We usually start off with the idea of a profit-sharing Keogh,'' says David Parsons, a partner with Oppenheim, Appel, Dixon & Co., a New York accounting firm. ``Your income is going to fluctuate and you don't want your business locked into a money-purchase plan.''

``We have a profit-sharing plan,'' says Marcia Sharp, part owner of a public relations firm in Washington. ``We annually contribute an allowable percentage of our payroll, based on employees' salary. While the employees do not contribute to this plan, Ms. Sharp says, ``I and a lot of other employees also have an IRA.'' Eventually, she says, the firm will probably start a 401(k) so people can save more pre-tax dollars.

Just because you're self-employed, of course, doesn't mean you have to have a Keogh. You can also have an IRA, and if neither you nor your spouse has a pension plan with another firm, you can deduct the full $2,000 individual contribution each year, no matter how much you make. Since this is the simplest to start and maintain and since the contribution rules are the most flexible, many entrepreneurs have just an IRA for a few years before opening a Keogh.

And even if the husband or wife has a pension elsewhere, it's still possible to earn up to $50,000 in joint income before either of them becomes completely inelligible for an IRA. So in the first few years of the new business, when it may be making little if any money, the IRA could still be an option.

A variation on the IRA is the simplified employee pension (SEP) plan. This specialized IRA lets the sponsor of the SEP make deductible contributions of as much as 15 percent of pay, up to a limit of $30,000 a year. Under certain conditions, the employee can also contribute up to $7,000 on a salary-reduction basis, similar to a 401(k) salary reduction plan.

Although it is possible to set up a retirement plan and put money in it without advance approval from the Internal Revenue Service, you should probably get advance approval to prevent disqualification at some later date. The IRS district director for your area can review your plan, and if you are setting up some kind of trust, have an attorney review it and make a request to the IRS for approval.