The self employed have to pay for their own social security, their own medical plan, and for employment taxes, but they do have attractive choices in the area of retirement planning. This is the basis of the hefty self-employment tax, but does not cover savings beyond the basic social security. Whether one works for himself or someone else it is a good idea to start saving today.
Independent contractors and small business owners can pick a plan that allows them to contribute higher amounts of deferred earnings than wage earners if they choose the SEP. The simplified employee pension IRA is one of the first plans introduced by the government for small business owners who were looking for a savings plan for their financial future. The SEP is easy to open.
Any small business owner can open up a simplified employee pension account by filling out the proper paper work at any bank or brokerage house. The account holder, a small business owner, can make higher contributions to this IRA than wage earners can contribute to their IRA. The SEP provides tax deferred growth for the money in the account but there is a penalty if funds are withdrawn before the account holder reaches the age of 59 and a half.
Once the plan holder reaches 70.5 years of age he is required to make withdrawals from his SEP account. The solo 401k plan allows a self employed person to contribute up to twenty percent of his income and if he owns a corporation that amount goes up to twenty five percent. Account holders can contribute tax deferred or after tax earnings to their solo 401k plan.
The simple IRA is another plan available to those who work for themselves and is easy to open. The simple IRA is also easy to administer. A person working for himself can contribute all of his annual income if he chooses which is a good option for those earning relatively low incomes.
As a last option, people turn towards annuity pensions to provide a stable source of income. Funding the annuity requires the deposit of a large sum into an account held at an insurance company. The insurance company manages the sum in a way such that it accrues interest and doles out a certain fixed amount over time. The issuing time period is anywhere from a decade to a lifetime. The final payout exceeds the initial deposit by some amount according to the terms of the contract.
Contrary to what a lot of people believe the self employed actually have many retirement planning options. It is never to late to start saving for one's financial future. Whether one chooses the simple IRA, the SEP, or a solo 401k, it is important to start saving today.
Independent contractors and small business owners can pick a plan that allows them to contribute higher amounts of deferred earnings than wage earners if they choose the SEP. The simplified employee pension IRA is one of the first plans introduced by the government for small business owners who were looking for a savings plan for their financial future. The SEP is easy to open.
Any small business owner can open up a simplified employee pension account by filling out the proper paper work at any bank or brokerage house. The account holder, a small business owner, can make higher contributions to this IRA than wage earners can contribute to their IRA. The SEP provides tax deferred growth for the money in the account but there is a penalty if funds are withdrawn before the account holder reaches the age of 59 and a half.
Once the plan holder reaches 70.5 years of age he is required to make withdrawals from his SEP account. The solo 401k plan allows a self employed person to contribute up to twenty percent of his income and if he owns a corporation that amount goes up to twenty five percent. Account holders can contribute tax deferred or after tax earnings to their solo 401k plan.
The simple IRA is another plan available to those who work for themselves and is easy to open. The simple IRA is also easy to administer. A person working for himself can contribute all of his annual income if he chooses which is a good option for those earning relatively low incomes.
As a last option, people turn towards annuity pensions to provide a stable source of income. Funding the annuity requires the deposit of a large sum into an account held at an insurance company. The insurance company manages the sum in a way such that it accrues interest and doles out a certain fixed amount over time. The issuing time period is anywhere from a decade to a lifetime. The final payout exceeds the initial deposit by some amount according to the terms of the contract.
Contrary to what a lot of people believe the self employed actually have many retirement planning options. It is never to late to start saving for one's financial future. Whether one chooses the simple IRA, the SEP, or a solo 401k, it is important to start saving today.
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