How To Save For Retirement When You’re Self Employed

In true entrepreneurial spirit, the number of US citizens who’re self employed has never been higher. But one thing that many people struggle with is understanding how, when working for yourself, you can put away adequate funds to guarantee a financially stable retirement.

The following discusses the key options you have for saving for retirement when you’re self employed 

Self Employed? The 5 Easiest Ways to Save for Retirement 

• The main 5 retirement saving options when you work for yourself
• Other retirement saving options

The main 5 retirement savings options when you work for yourself

When it comes to saving for your retirement on a self employed basis, there are 5 main options available.

1. A Traditional or Roth IRA: For those who’re self employed, you can choose between a Traditional IRA or a Roth IRA. Both are easy to open and fund, as well as being allowed whether you’re a one man band or have employees. The Roth IRA might be more beneficial for those who’re just starting out and not yet making much post-tax profit, but there are certain restrictions on these—such as earning over a certain limit. Whichever type you decide on, be sure to roll any previous employer 401Ks into your IRA.
2. A Simple IRA: For those who employ more staff—up to 100 in total—this type of IRA can be a good choice. However, there are many restrictions on what you can and can’t do, such as high penalties for early withdrawals. There’s also a 401K version of the Simple IRA, which might be an option worth looking at.
3. A Solo 401K: These are for those who don’t employ any other workers (although you can allow your spouse to contribute). They work in pretty much the same way as an employer 401K and offer the same tax advantages. Once a solo 401K has more than $250,000 in it, you’ll have to file the paperwork with the IRS on an annual basis.
4. A SEP IRA: Slightly less complex to run than a solo 401K, these are best for those who have no, or just a handful of, employees. While there is no limit on the number of employees you can have, if you make a contribution for yourself then you have to make the same for all other eligible employees. 
5. A defined benefit plan: For self employed individuals with no employees and who want to make high investments for their retirement, this is one of the best options. While it’s the most expensive option—and therefore not suitable for everyone—if you’ve got a significant amount to save annually then this might be the right choice for you. By significant, we mean at least $50,000 per year. However, be aware that you need to commit to the amount you specify. Hefty fees apply if you need to change the amount.

Other retirement saving options

Of course, there are always other ways you can save money for your golden years, depending on your attitude to risk. The stock market, bonds, investing in property… These are all valid places in which to invest your income to ensure that, when the time comes, your retirement finances can fund you to the tune of what you’ve already become accustomed.

Need Self Employed Retirement Saving Advice? Contact Capita Today

At Capital, ensuring you have the right retirement saving plan in place for your circumstances is what we specialize in.  From working out the amount you need to save for a financially healthy retirement to understanding the best products in which to direct your money, your personal Capita advisor is with you all the way.

No matter how far from (or close to) retirement you might be, you should put a strategy in place at the earliest opportunity. So what are you waiting for?

Visit https://www.capitafinancialnetwork.com to find out more and get in contact to arrange your first, no-obligation, consultation.