 It was always important to save for retirement. But it is even more important for solo-managers. This is because you don't have a company sponsored pension plan or matching 401K contributions to rely on. You have a choice as there are many retirement plans available to self employed individuals and small businesses. Then you will only have to choose.
You are offered a sample of the retirement plans available to solo-mangers and small businesses:
Roth IRA. If you are just starting to save for retirement, you should take this into your consideration. As Roth IRAs are low-cost, very flexible, and allow you to grow money tax-free as long as you follow the distribution rules, this has to be the first thing you will do. Besides, contributions can be made up to $4,000, and can be withdrawn at any time without tax or penalty.
SEP IRA. A SEP IRA is a good choice for those who are looking for a low-cost way to save for their own and for their employees' retirement. With the help of this you will save up to 25% of your compensation for a maximum of $44,000 per year, because it offers 20% of your self-employment income. SEP IRAs have also low maintenance fees. By the way, contributions can be made for employees who cannot contribute to their own SEP IRA.
Simple IRA. This is a simple plan that offers many of the profits of a 401K, but with less IRS reporting requirements. You are allowed to contribute up to $10,000 to a Simple IRA, with an employer match of up to 3%. Besides, contributions are tax-deductible, and Simple IRAs also have low annual fees. Employees are allowed to contribute to Simple plans, and a company match is mandatory. A Simple IRA can help you allowing you to put more away towards your retirement than other plans. But this is in case you have a lower salary or self-employment income in your small business.
Solo 401K. With the help of the solo-401K you may put the maximum amount away, with less cost and less reporting requirements than a traditional 401K. It is similar to a SEP IRA, contributions max out at $44,000. Nevertheless, unlike a SEP IRA, partakers 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. The most important goal of it is to save substantially more than a SEP IRA. And this depends on your compensation; in this case it has to be less than $220,000 per year. You should know that a solo-401K is not appropriate for small business with employees or expecting to add employees.
Before planning you should consider many factors, which influence on your plan. So, think over 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. By the way, to get more information about small business retirement plans you can contacting a no-load mutual fund company, a discount brokerage company or a fee-only financial planner.
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