After struggling with my finances for more time than most people realize is possible, I began thinking more seriously about what I could do to make things right. I began working hard to go through and identify challenges that I was faced with, including the fact that I had several kids that cost a lot of money. I began thinking of ways to work on saving cash, and it was really amazing to see how much of a difference something like skipping drinks with dinner and working on finding foods we could make at home could really be. I wanted to start a new website all about creating a more solid financial plan. Check out this blog.
Self-Employed? You Can Still Plan For Your Retirement
Being self-employed doesn't mean that you have to give up on your retirement planning. You can still contribute to and create a retirement fund as a self-employed individual. In fact, you are in a great position to build your wealth and retire well if you start making a plan right away.
Solo 401(k)
The first thing that you can set-up is a Solo (401(k). This type of retirement account is specifically for business owners where they and potentially their spouse are the only employees of their business.
You contribute pre-tax dollars towards your Solo 401(k) plan. One of the big advantages of having a Solo 401(k) plan is that you are actually able to contribute more than you can to a 401(k) if you worked for a business.
In order to make up for the employer-offered match that regular employees get added to their 401(k) plans, the IRS allows individuals to contribute up to 25% of what they earn to a Solo 401(k) plan.
Roth or Traditional IRA
Roth and traditional IRA work the same for both self-employed and regular workers. With these types of retirement accounts, you are able to contribute up to $5,500 per year. This is a great retirement account to get you started, and is a great option to supplement other retirement accounts.
How an IRA account impacts your taxes depends on the type of account you set up. If you go with a traditional IRA, you can deduct money from your taxes. If you go with a Roth IRA, you don't get a deduction on your taxes now, but you don't have to pay taxes on the money in the future.
SEP IRA
Another type of account you can set up is a SEP IRA. This type of retirement account allows you to save more money than a Roth or traditional IRA.
You can also use this type of retirement account if you have no employees or if you run a small business with just a few employees. The catch is if you have employees, you have to offer them this retirement option as well and you have to offer an equal retirement contribution to all employees.
You can contribute up to 25% of your net self-employment earnings or $55,000 dollars, whichever number is smaller. A SEP IRA can really allow you to catch up on your retirement savings.
If you are self-employed, you have lots of options to set up retirement accounts for yourself. In fact, you will be able to save more in many instances than a regular worker as you represent both the employee and the employer in your retirement transactions. Talk to retirement financial planning professional, and figure out what type of retirement account will work best for your business and your saving needs.