Retirement Savings for Self-Employed Individuals

Self-employed individuals have several retirement savings options, including a Simplified Employee Pension (SEP) plan, a solo 401(k) plan, a traditional or Roth IRA, and a personal savings account.

A SEP plan is a type of retirement plan that allows self-employed individuals to contribute up to 25% of their net self-employment income, up to a maximum of $58,000 in 2021. Contributions are tax-deductible and the plan is easy to set up and maintain.

A solo 401(k) plan is a type of retirement plan that allows self-employed individuals to contribute up to $58,000 in 2021, or $64,500 if they are over age 50. Contributions are tax-deductible and the plan offers a range of investment options. However, the plan may be more complicated to set up and maintain than a SEP plan.

A traditional IRA allows individuals to contribute up to $6,000 in 2021, or $7,000 if they are over age 50, and contributions may be tax-deductible. A Roth IRA allows individuals to contribute up to the same limits, but contributions are not tax-deductible and qualified withdrawals are tax-free. Both types of IRAs offer a range of investment options.

A personal savings account is a simple way for self-employed individuals to save for retirement. While contributions are not tax-deductible, the account offers flexibility and accessibility, as funds can be withdrawn at any time without penalty.

Saving for retirement as a self-employed individual offers several benefits, including tax deductions, compound interest, and the ability to build a nest egg for the future. Additionally, saving for retirement can provide peace of mind and financial security during retirement years.