Featured:
Allergies
Grilling Guide
eHow Now Blog

Retirement Plans for the Self Employed

Working as a self-employed individual can provide you with flexibility and the ability to take charge of your own income. When you work in this capacity, you also have a few options to choose from when it comes to retirement plans. Choosing the right retirement plan could be the difference between retiring comfortably and continuing to work when you get older.

  1. Solo 401(k)

    • One of the most attractive options for self-employed workers is the solo 401(k). The solo 401(k) is a type of plan that allows workers to take advantage of the large contribution limits that come with the traditional 401(k). The money that you put into this plan is pretax and then you can also defer taxes on the earnings from your investments in the account. For example, as of 2011, you can contribute a maximum of $16,500 per year out of your salary. With profit sharing, you can bump the total up to $49,000 per year.

    SIMPLE IRA

    • The SIMPLE IRA is another type of retirement plan that many self-employed people use to save. With the SIMPLE IRA, you have the ability to contribute to your account out of your pay and then match those contributions with money from the profit of the business. The contributions for this type of account are a little smaller with a maximum of $11,500 plus the match percentage. These plans are easy to maintain and to set up with a plan provider.

    SEP IRA

    • The SEP IRA is another option that you may want to consider if you are self-employed. With this type of retirement plan, you do not make any contributions to the account out of your own paycheck. Instead, you can make a contribution out of the profits of the company. The maximum contribution that you can make is 25 percent of the amount of net income for your business. The maximum dollar amount that you can contribute, as of 2011 is $49,000 per year.

    IRA

    • The individual retirement account or IRA is another option that you can pursue as a self-employed person. With the IRA, you can contribute up to $5,000 per year, unless you are over the age of 50. In that case, you can contribute up to $6,000 per year. The money you contribute is on a pretax basis. You can also choose a Roth IRA, which allows you to contribute with after-tax money and then not have to worry about taxes when you reach retirement.

Related Searches:

References

Comments

You May Also Like

Related Ads

thumbnail
Featured