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'Seasonal' retirement plans
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February 25, 2000: 6:45 a.m. ET
Seasonal workers can create a retirement nest egg
By Staff Writer Jennifer Karchmer
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NEW YORK (CNNfn) - Whether you're landscaping homes during the summer, raising crops on a New England farm or working the slime line at an Alaskan fish cannery, your work is cut out for you -- on a seasonal basis.
Your employer probably doesn't offer a 401(k), but you can build up a retirement stash even though you earn the bulk of your annual salary in just a few months.
"Farmers are rich in the summer and then sell hay in the winter," said Greg Daniel, a certified financial planner with Creative Financial Solutions in New York City. Daniel himself grew up on a northern New Jersey farm and knows the ups and downs of an occupation that relies on which way the winds blows.
Three-legged stool
A typical retirement strategy consists of Social Security benefits, a company pension or retirement plan and any long-term accounts you open for yourself such as an IRA, says Paul Hrisko, a certified financial planner in Cleveland Heights, Ohio.
So start contributing pre-tax dollars to your company's 401(k) -- if it's offered. But construction workers and landscape artists who work their profession for several months until the temperature drops and then dabble in another vocation the remainder of year typically don't have such an option.
"I would think they would be less likely to have employer contributions," said financial consultant Burton Greenwald in Philadelphia.
To Roth or not
If your employer doesn't offer a 401(k), open an IRA account and contribute the maximum $2,000 annually if you can, certified financial planners say.
Whether it's a Roth IRA or a traditional IRA is a personal choice depending on whether you want to pay taxes now or later.
"It's really a judgment call with most people," Hrisko said. The bottom line is: open either type of IRA account today and begin contributing.
Click here to read more about IRAs.
By law, you can contribute up to $2,000 a year to either plan. With a traditional plan, you can deduct your contributions and you'll pay income taxes when you make a withdrawal after age 59-1/2.
With a Roth IRA, you can't deduct your contributions but the money is tax-free when you withdraw it after age 59 1/2. If you make a withdrawal from either plan before that age, you will pay a 10 percent penalty on the amount you take out. There are a few exceptions to the penalty, such as disability or as a first-time homebuyer.
So when you're working the autumn harvest at a New England apple orchard or managing a summertime amusement park, you can breath easier during the off-season while your retirement nest egg grows.
Sooner rather than later
Because your salary will fluctuate throughout the year, experts suggest you make your contribution to your retirement account in January, if you can, to gain the benefit of compounding throughout the year.
If you can't make one lump sum early in the year, make monthly contributions of about $167 to reach the $2,000 maximum, Hrisko said.
When disaster strikes
Seasonal workers live and die by the changes in temperature so whether you're grooming lawns or growing corn, you should have an emergency fund equal to at least one month of expenses, Hrisko says.
Open an accessible short-term account like a CD or money market account to draw from should disaster strike and affect your income.
Because your expenses will differ throughout the year, Hrisko suggests you gauge the amount using your most expensive month to be on the safe side.
For example, if you work in construction during the heat of the summer, and take various part-time jobs the rest of the year, use your average expenses during the month of July as a basis for your emergency fund. You'll be making more that time of year but will probably be spending more as well.
You're your own boss
Let's say you're in business for yourself managing your own landscaping company making the bulk of your salary between April and October. What are your retirement plan choices as a small business owner?
Experts suggest either the Keogh or SEP-IRA which both allow you to invest in stocks, bonds, mutual funds, CDs, or money market funds. Which one is right for you will depend on how much money you would like to sock away into your retirement account.
The main difference between the two plans are the contribution requirements:
*Under the Keogh, you can contribute up to 25 percent of your annual earnings with a $30,000 maximum.
*Under the SEP-IRA, you can contribute up to 15 percent of your annual earnings with a $30,000 maximum.
Like IRAs, Keoghs must be established by the end of the year but contributions can be made at any time up until April 15 of the next year. Also like IRAs, it is advantageous to contribute to the Keogh as early in the year as possible to let earnings accumulate tax free.
Some workers may prefer the SEP-IRA since, as its name implies (simplified employee pension) plan, it's easier to set up, less expensive, and requires minimal reporting to the IRS.
"So what if I have a bad year?" may be the mantra of the seasonal worker, says certified financial planner Tom McFarland in Concord, Mass. But by setting up the emergency fund and the retirement accounts, you can have some stability in your life even though the weather is unpredictable. 
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