Retirement Plans For The Self Employed

Being self employed has many benefits. However, it also has drawbacks. One challenge many self employed people face is retirement. Without a company to provide for them, entrepreneurs must form their own retirement plans. Here are some of the best retirement plans for the self employed.


Simplified Employee Pensions (SEP IRAs) are simple, but they can get the job done. With a SEP IRA, self-employed people can contribute up to 25% of their net income, with a $49,500 (2011 numbers). Since all SEP contributions must be made by the employer, this is only the net income from being self-employed, not from a second job at a company. The reports required for a SEP IRA are fairly simple, which will save an entrepreneur precious time. Unfortunately, the SEP IRA does not have a Roth option.

Solo 401(k)

The Solo 401(k) is slightly more complicated than the SEP IRA, but it also have some added benefits. Solo 401(k)s are limited to business owners and their spouses. Through the individual contributions and company matches, business owners can reach the same ceiling that the SEP IRA has. For business owners over 50, this is actually increased by $5,000. A loan can be taken out against one’s Solo 401(k), but this is rarely advisable due to interest and fees. The Solo 401(k) is simple to set up, and many financial institutions charge less than $100, if anything, to create one.


The SIMPLE IRA, also called the Savings Incentive Match Plan for Employees IRA, is extremely easy to create. It should take anyone about 20 minutes. The SIMPLE IRA is a great way for anyone who owns a business to provide for their own retirement, as a self-employed entrepreneur, as well as their employees’ retirement. It has much lower limits than the SEP IRA and 401(k). In 2001, the maximum contribution was $11,500. For those over 50, it increased to $14,000.

The SIMPLE IRA is suitable only for small, but financially well-grounded companies. Any business that offers this to its employees must match the employee contributions. Typically, this has been a 100 percent match on up to three percent of the employee’s pay. It also is not available to anyone who has another retirement account, such as a 401(k) at a day job.

Other Investments

When considering retirement plans for the self employed, one must not exclude traditional retirement plans. Traditional IRAs, Roth IRAs, annuities and other investment accounts can all play an integral role in one’s overall retirement. The above plans offer many advantages over personal ones. Matches can be made by one’s company. Some plans have high contribution limits. The SIMPLE IRA does not have an income limit. However, entrepreneurs must not forget to also consider personal retirement accounts as well.

By understanding these plans, the self-employed individual can prepare for retirement. It may seem daunting, but retiring is possible. Anyone needing assistance in planning has many resources to help them learn about self employed retirement plans. There are tax-advantageous plans to help entrepreneurs along the way.