Retirement Plans for Solo Entrepreneurs

Saving for retirement is even more essential for solo-entrepreneurs because you don’t have a company sponsored pension opinion or matching 401K contributions to rely on. There are many retirement plans available to self employed individuals and diminutive businesses. Which one is fair for you?

Here is honest a sample of the retirement plans available to solo-preneurs and diminutive businesses:

Roth IRA – although this is not unprejudiced for solo-preneurs, this is the first space you should seek to assign if you are unprejudiced starting to keep for retirement (or resuming to set after starting a business) . Roth IRAs are low-cost, very flexible, and allow you to grow money tax-free as long as you follow the distribution rules. Contributions can be made up to $4,000, and can be withdrawn at any time without tax or penalty (earnings withdrawn may be subject to penalty and tax if withdrawn before age 59 ½ and determined other conditions are not met) .

SEP IRA – if you’re maxing out your Roth IRA, and are ready to set aside more, a SEP IRA allows you to do up to 25% of your compensation (20% of your self-employment income) for a maximum of $44,000 per year. Contributions are tax-deductible, and SEP IRAs have uncouth maintenance fees. Contributions can be made for employees also, but employees cannot contribute to their enjoy SEP IRA. This is a suited choice if you objective have a handful of employees and are looking for a low-cost arrangement to achieve for your gain and your employees’ retirement.

Simple IRA – a Simple belief offers many of the benefits of a 401K, but with less IRS reporting requirements. You can contribute up to $10,000 to a Simple IRA, with an employer match of up to 3%. Contributions are tax-deductible, and Simple IRAs also indulge in outrageous annual fees. Employees are allowed to contribute to Simple plans, and a company match is mandatory. If you have a lower salary (or self-employment income) in your cramped business, a Simple IRA allows you to build more away towards your retirement than other plans.

Solo 401K – for miniature businesses with no employees, the solo-401K allows you to effect the maximum amount away, with less cost and less reporting requirements than a ancient 401K. Similar to a SEP IRA, contributions max out at $44,000. However, unlike a SEP IRA, participants in a Solo-401K can contribute up to 100% of the first $15,000 of compensation or self-employment income, and an additional amount up to 25% of your compensation. This is essential because it allows you to set substantially more than a SEP IRA, if your compensation is less than $220,000 per year. A solo-401K is not appropriate for puny business with employees or expecting to add employees.

There’s no one best notion for all microscopic businesses. The best notion for you will depend on many factors, such as whether you have employees or not, how mighty you want to contribute each year, how powerful time you want to utilize administering the understanding, etc. To fetch more information about runt business retirement plans, contact a no-load mutual fund company, a discount brokerage company or a fee-only financial planner.