5 Retirement Options When You’re Self-Employed

Even if you don't work for a big company, you can still use a retirement account to cut taxes and save more for the future. Laura answers a reader question and covers five of the best retirement accounts to use when you're a freelancer, work part time, are self-employed, or work for a small company that doesn't offer a retirement plan.

Laura Adams, MBA
10-minute read
Episode #422

You’re always 100% vested in (or have full ownership of) all the contributions you and an employer make to a SIMPLE—and you can stop making contributions at any time during the year.

Who can use it: Anyone who is self-employed without employees or with fewer than 100 employees, no matter if you’re set up as a sole proprietor, partnership, or a corporation.

Pro: The major advantage of a SIMPLE IRA is that it’s generally easier to administer than a regular 401k.

Con: The major drawback to a SIMPLE IRA is that if you do have employees, you’re generally required to contribute to their accounts. Also the contributions limits aren’t as high as other retirement options for the self-employed.

2015 Maximum Contribution: A SIMPLE IRA is funded by both employee and employer contributions. As an employee, you can contribute $12,500, or $15,500 if you’re age 50 or older. And as I mentioned, from the employer side, you must choose to make contributions as either a flat 2% of compensation or up to a 3% matching contribution.

If you use a SIMPLE IRA for your business you can also contribute to a traditional IRA or a Roth IRA, or to a retirement plan at another company.

The retirement plans that I’ve covered are the most common, but this isn’t a complete list. Check out IRS Publication 590Individual Retirement Arrangements and Publication 560Retirement Plans for Small Business to explore options for your business endeavors.

If you're like Shawnna and are having trouble saving for retirement because your business is just getting started or has irregular income, it's still important to get in the habit of saving as early as possible. Open up one of the retirement accounts I covered here and begin setting aside even a small amount on a regular basis.

While it's never too late to begin investing for retirement, you'll thank yourself later on if you get a head start now!

If you need help setting up a retirement plan or aren’t sure how to use multiple retirement plans properly, be sure to contact a qualified tax accountant. Paying a professional to help you maximize tax benefits for your business and retirement accounts will pay off.

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About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.