As a self-employed individual or small business owner, there are tons of responsibilities that you have to take on each and everyday. Of course, planning for your future and retirement is one of those things. Not only does setting up a retirement plan go a long way in helping you with tax deductions, but the sooner you do it the better prepared you will be for the future. With that being said, you need to be aware of the fact that there are several different retirement plans and options available for the self-employed individual. Below, you will learn about these different options and why each might be suitable for you.
Exploring The Traditional IRA Account
If you are just starting out, you probably don’t have tons of money to store away, or maybe you just want to keep things nice and simple. Whatever the situation is, it sounds like an IRA account would be perfect for you. This is without a doubt one of the easiest ways for you to start saving money. All you have to do is open an IRA account through an online brokerage firm and just simply keep track of all the contributions that you make throughout the year. These transactions can be deducted from your taxes. Another great thing about IRA accounts is that there are no special requirements and just about any individual can easily open an account.
Simplified Employee Pension IRA
Another great and simple retirement strategy for any self-employed individual is the SEP IRA. This type of account can be opened at virtually any bank, mutual fund sponsor, or brokerage firm. Most of the annual fees are very low to non-existent, which is great for any self-employed individual. However, there is a limit as to how much money you can store away. You are only allowed to store away as 25 percent of your net income. One of the things that really make these accounts so special and appealing to self-employed individuals is their flexibility.
The money always stowed away always stayed sheltered from taxes, and money can be contributed to this account in order to help cut back on your tax bill. Remember that you can get assistance with disputes from a labor employment lawyer.
Why Choose The Individual 401K?
The individual 401K plans are an excellent option for anyone that has a considerable amount of money to stow away in a short amount of time. This plan allows individuals to stow away more money than what you normally could with a SEP IRA account. In addition to this, you can even add a spouse to the account and he or she can even squirrel away money in the account as well.
Another excellent thing about a 401 K account is, that if you find yourself or business in a vulnerable situation, you always have the option of taking out a loan against the account. Most banks or lenders will allow you to borrow at least half of what you have saved and give you around five years on the loan. Keep in mind that this should always be a last resort, because it can put a huge damper on your future plans.