How to Choose the Best Self-Employed Retirement Plans

There are a number of self-employed retirement plans available to workers, but it can sometimes be rather confusing to figure out which one -- or ones -- are the best for you. While individuals employed at a corporation or large business can use an employer-sponsored 401k as a place to put their retirement savings, it's a little bit more complicated for those who work for themselves. Saving for retirement is extremely important if you want to be able to support yourself comfortably in your old age, without relying on government financial aid or loans from family members. Therefore, if you're self-employed, it's a good idea that you take the time to learn about the different retirement plans for self-employed workers, so that you are educated in making the right choice.

Read on if you would like to know more about how to choose the best self-employed retirement plans for you.

Instructions

1. Research and learn more about the different retirement plans available for self-employed workers. There is the SEP (Simplified Employee Pension) IRA, the SIMPLE IRA Plan, the solo -- or Single-Participant -- 401(k), and the Keogh Plan. Each of these plans have their advantages and disadvantages; some may not work for you, so it's a good idea that you are well-versed in their policies and terms before you attempt to set up one of these accounts.

2. Consider how much you want to be able to put in your retirement account. Of the different self-employed retirement plans, the Keogh's Defined Benefit Plan allows you the highest annual contributions. You can contribute more than $100,000, depending on your age and income. SIMPLE IRA plans allow you to contribute the least, at $11,500 annually ($14,000 if you are over the age of 50). For SEP IRA and Solo 401(k)s, the limit is $49,000 -- although those 50 and older can contribute more using "catch-up" provisions.

3. Think about whether or not you will want to be able to take a loan out on your retirement account. While it's typically not recommended that you do so, some people may want the option, in the case of emergency, etc. With SEP IRAs and SIMPLE IRAs, loans are not allowed.

4. Consider fees, set-up costs and maintenance. SIMPLE IRAs and SEP IRAs are relatively simple to set up and to not incur the same potentially expensive costs and fees that come with establishing a solo 401(k) and Keogh Plan accounts.

5. Once you've chosen from one of the self-employed retirement plans, make sure you set it up by the deadline. If you are using an SEP IRA, then it has to be set up and funded by the tax filing deadline. If you are using a SIMPLE Plan, then you have from January 1st to October 1st to set up the account, unless you've set up a SIMPLE Plan for your company in the past -- then it is required to be set up on January 1st. Both the Keogh Plan and Solo 401(k)s have to be established by December 31st of the year you want the tax deduction.