Retirement Plans For Solo Entrepreneurs
Keywords: retirement, retirement planning, financial coach, financial planner, financial planning
Saving for retirement is even more important for solo-entrepreneurs because you don’t have a company sponsored pension plan or matching 401K contributions to rely on. There are many retirement plans available to self employed individuals and small businesses. Which one is right for you?
Here is just a sample of the retirement plans available to solo-preneurs and small businesses:
Roth IRA - although this is not just for solo-preneurs, this is the first place you should look to save if you are just starting to save for retirement (or resuming to save 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 Contributions can be made up to $4,000, and can be withdrawn at any time without tax or penalty (earnings withdrawn may be subject to penalty and tax if withdrawn before age 59 ½ and certain other conditions are not met).
SEP IRA - if you’re maxing out your Roth IRA, and are ready to save more, a SEP IRA allows you to save 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 low maintenance fees. Contributions can be made for employees also, but employees cannot contribute to their own SEP IRA. This is a good choice if you just have a handful of employees and are looking for a low-cost way to save for your own and your employees’ retirement.
Simple IRA - a Simple plan 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 enjoy low 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 small business, a Simple IRA allows you to put more away towards your retirement than other plans.
Solo 401K - for small businesses with no employees, the solo-401K allows you to put the maximum amount away, with less cost and less reporting requirements than a traditional 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 important because it allows you to save substantially more than a SEP IRA, if your compensation is less than $220,000 per year. A solo-401K is not appropriate for small business with employees or expecting to add employees.
There’s no one best plan for all small businesses. The best plan for you will depend on many factors, such as whether you have employees or not, how much you want to contribute each year, how much time you want to spend administering the plan, etc. To get more information about small business retirement plans, contact a no-load mutual fund company, a discount brokerage company or a fee-only financial planner.
Kristine A. McKinley, CFP, CPA, and founder of Beacon Financial Advisors, offers financial and tax planning on an hourly, fee-only basis.
To sign up for free financial planning tips, worksheets, checklists and more, visit www.beacon-advisor.com.
Previous Articles Highlighter:
Five Steps To A Comfortable Retirement - Without Winning The Lottery! (1)
You can't reach your destination if you don't know where you're going. 3. Participate in company sponsored retirement plans. Many companies offer matching contributions to your 401K or other retirement plan contributions.
Juggling Retirement And College Savings (2)
Use retirement accounts to save for retirement and college. Retirement accounts can be tapped into to help pay college bills (IRA withdrawals can be taken penalty free for college expenses; Roth IRA contributions can be taken penalty and tax-free).
401K Or Roth IRA - Which Is Better? (3)
There is no matching contribution for a Roth IRA, so you should invest in your 401K up to the matching contribution first, before you invest in a Roth IRA. Investment Choices - Most 401K plans have a limited number of investments to choose from.
Cash Flow Planning For Solo Professionals (4)
Lack of cash flow planning is the reason why many businesses fail. In fact, many PROFITABLE businesses fail because of cash flow issues. Without adequate cash, you cant pay your bills and you cant make plans for your business.
Top 5 Missed Tax Deductions (5)
Expenses that qualify include tax preparation fees, safe deposit box fees, fees paid to investment advisors, legal and accounting fees related to tax planning, broker and IRA fees paid directly, investment publications, and more.
You Know It, You Love It -- Write About It! (6)
Ideally, you'll explain your business and let the reader know exactly what you're doing. You could say, "I run a website selling surveying equipment. These are questions I get asked all the time in my line of work, and I thought it would be helpful to write an article answering them once and for all." You can go into as much or as little detail as you want in these intro paragraphs -- remember, no one is actually grading this paper!
5 Ways To Make Money Online (7)
Keywords: Internet business, home business, home-based business, online business, make money online, make mone There are many different ways to make money on the Internet. Here is an overview of the five most popular online business models: Sell Digital Products The term "digital product" means that the product is delivered electronically.
What Are The Benefits Of Drinking Espresso (8)
I'm sure your body will soon be thanking you for it! For more information on how to use your espresso machine and more information about th espresso machine try visiting www.coffeebean101.com, a website that specializes in providing espresso tips, advice and resources.
Graphic Designing ... How Do I Do It? (9)
There were two things each 'top seller' had in common, these were a good feedback rating and awesome sales page graphics, these really blew you away, and I was amazed!
What You Need To Do To Become A Navy Officer (10)
It would be a lot easier on you. The officer pipeline is different than the enlisted. At least talk to an officer recruiter." Victor Epand is an expert consultant for www.WarGear.info.
Newer Articles Highlighter:
Understanding The Techniques Professionals Used To Achieve Great Digital Photography (1)
The focus must be on the subject with the landmark or whatever is behind as the accent for the shot. A lot of photographers both professional and amateur shoot with the model in the middle.
Basic Facts About Children And Dieting (2)
Try replacing processed sweets with naturally sweet foods like fruits. Watch Out for Caffeine. Many adults are addicted to the caffeine rush that comes with drinking coffee, but what parents do not realize is that soda can have the same effect on children.
The Imperfection Of Perfect Credit Behavior (3)
Insurance companies also are known to consider your credit score when setting your rates. They say there is a relationship between credit score and risky behavior, which justifies that check.
2007 Honda CR-V Review (4)
This is the name which has given the acronym CR-V to one of Honda's most popular releases. And it is, indeed, both compact and fun to drive. For the past decade, the Honda CR-V has proved to be a reliable family car: affordable, spacious, without appearing too large, and, best of all, safe.
Stay Organized With A Garage Storage System (5)
No food should be stored less than six inches from the ground to protect it from possible damage as well as be an attraction for animals you may not plan to feed.
The Convenience Of The Digital Audio Book (6)
When we engage in reading a book or anything else for that matter you need the undivided attention of your eyes as well as your brain in order to follow the story line and not have to read the same page couple of times, which implies that you cannot do anything else besides reading.
Planning Your New Business: Feasibility Analysis Part Three (7)
Other than sinking more money into advertising than it earns back, the other major mistake of marketing is allowing your business to become over-exposed, so be careful how much you advertise.
What's Going On In Your Workplace Online? (8)
This can give you a bird's eye view into your employees' behavior patterns when they don't know you are looking. When the management is away, the staff members will often play.
Should Young Adults And Kids Use Tanning Beds? (9)
There's also a chance we won't get a relatively even tan if we trust the sunlight available to all manner of creatures outdoors, and not the comfort of an indoor tanning salon!
Cruise Ships On The Rise (10)
Sometime in a week long trip you'll find that more than ten tons of beef and almost 30,000 eggs are used in meals. Although people think of the cruise ship as a place to vacation, the cruise ship has had many other uses as well.