Many people are of the opinion that self employed people get the short end of the stick when it comes to paying for Social Security, employment tax and health insurance. These are expenses they have to bear on their own whether they like it or not. However, the only silver lining is retirement plans for self employed people.
There are several retirement plans targeting self employed people that allow them to save more money tax deferred for their retirement compared to what most plans offered to employed people by their employers.
Some of the best retirement plans for self employed people are as follows:
Simplified Employee Pension IRA: This is one of the oldest kinds of retirement plans for small businesses. Also known as SEP, the Simplified Employee Pension IRA is much easier to administer compared to a 401k plan. It is also extremely easy to open. All that is required is filling out the proper documents at a bank or broker and the account is opened. The contribution is quite high when compared to a 401k plan and in 2009, a person could contribute up to $49,000. This retirement plan also offers tax-deferred growth for the money and a person has to pay a ten percent penalty on early withdrawals made before reaching the age of 59.5 years. Also, the person would have to pay tax on the withdrawal. However, when the person reaches the age of 70.5 years, he or she has to make annual withdrawals.
Solo 401k: This retirement plan has the same limits for contribution as a traditional 401k plan. However, the Solo 401k plan allows a person to contribute up to 20 percent of their income if they are self employed, or up to 25 percent of their income if they are working for their own corporation. The Solo 401k can be either tax deferred or as a Roth 401k where the contribution is made from taxed monies.
Simple IRA: This retirement plan for self employed people is extremely simple and easy to set up. It is also easy to administer. While this plan has a low limits for contribution, a person can contribute hundred percent of their income. It is ideal for self employed people who have low incomes.
Many people are of the opinion that self employed people get the short end of the stick when it comes to paying for Social Security, employment tax and health insurance. These are expenses they have to bear on their own whether they like it or not. However, the only silver lining is retirement plans for self employed people.
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Retirement Plans
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