I love having my own business. While it is a lot of work, it is also very rewarding. I need a creative outlet in my life, and my business gives that to me. I also love having another income source. You never know what life will throw at you, and diversifying your income streams helps insure against a sudden loss of income.
Another benefit of having my own business is being able to invest money in a self-employed retirement plan. There are several types of plans available to small business owners and employees, and this week I will run articles discussing the major self-employed retirement plans in more detail.
The articles were written by Robert D. Flach, a New Jersey area tax professional who also writes the blogs The Wandering Tax Pro. Robert brings over 35 years of tax experience to the table and does a better job than I could at explaining these self-employed retirement plans.
This series will cover the types of self-employed retirement plans, who is eligible for these plans, the contribution limits, and deadlines for setting up the plan and contributing to the plan.
Types of Self-Employed Retirement accounts
The main types of self employed retirement accounts are:
Where to Open a Self-Employed Retirement Plan
There are many great brokerage services that offer self-employed and small business retirement plans. I recommend examining your needs and comparing your options before making the decision. As always, research your options before opening a retirement account. There are several rules regarding eligibility and contribution limits and these self-employed retirement plans may affect your taxes significantly. I’ve done my research, and later this week I will share which of these self-employed retirement plans I chose to open, and why.
The most common type of self-employed retirement plan the majority of people open is a solo 401(k).
These plans are an excellent option for anyone who has their own business and doesn’t have any employees. One of the unique aspects of these plans is you can hire your spouse, and they can contribute to the plan, too. As long as you don’t plan on adding any employees to your business, then these can be one of the best possible plans.
With these solo 401(k)s, you can contribute up to $54,000 if you’re under 50. If you’re over the age of 50, then you can contribute an additional $6,000 as part of the catch-up contribution program. Like a traditional 401(k), you make the contributions pre-tax, and the distributions are taxed.
There are hundreds (and hundreds) of hurdles and difficult decisions a self-employed business owner will have to face. Your retirement plan is one of those decisions. Thankfully, there are several of excellent options you can choose from.
Your retirement is one of the most important things you can plan for. You’ve worked hard to reach this stage of life, and as a person whohas started their own business, you shouldn’t have to sacrifice your retirement plan.
If you have any questions about retirement plans or need some advice on deciding which plan is best for you, please feel free to read the rest of my articles on self-employed retirement plans. As a small business owner, I know it’s not easy, but I’m here to help you make the best decisions possible.