Whether you're a full-fledged small-business owner or you just run a business on the side, there are several smart ways to save for retirement that are specifically designed for the self-employed. Here's a comparison of three popular self-employed retirement savings plans: the solo 401(k), the SEP IRA and a SIMPLE IRA. See which option is right for your retirement planning needs.
Works well for: A self-employed business owner with no employees or a worker participating in an employer’s 401(k) who also has a side business.
How much you can contribute: As an employee, you can contribute up to $18,500 for 2018, plus up to $6,000 extra if you are 50 or older. As a sole proprietor, you can contribute 20% of your company’s net earnings. For 2018, total contributions can’t exceed $55,000 (not counting the catch-up contribution).
Maximize it: If you have a side gig and work for a company with a retirement plan, contribute to both.
How much it costs: There’s usually no annual maintenance fee, but you’ll need to file an annual IRS Form 5500 if your plan assets exceed $250,000.
Works well for: Self-employed people with fluctuating incomes (such as real estate agents) or a business with 100 or fewer employees. Both employer and employee can contribute.
How much you can contribute: Up to $12,500 in salary deferrals, or $15,500 if 50 or older. Employers match employee contributions up to 3% of compensation, which can be reduced to 1% in any two out of five years. Or an employer can contribute 2% of each employee’s compensation, up to $5,500.
Maximize it: Some firms start out with a SIMPLE IRA and then change to a 401(k) when they have more employees or want to match more than the 3% limit in a SIMPLE plan.
How much it costs: Costs vary by plan provider. Fidelity, for example, charges an annual fee of $25 per participant, or a $350 plan fee.
Works well for: A small business with only a few employees or a self-employed owner who might have made a nice profit last year but needs more time to establish a plan. (You have until October 15, 2018, to set up a plan for 2017. Other plans must be set up by the end of the year for which contributions are made.)
How much you can contribute: No employee contributions. You as the employer can contribute up to 20% of your net income, to a maximum of $55,000.
Maximize it: Only the employer can contribute. Whatever percentage you select, you must contribute the same percentage of compensation for each employee.
How much it costs: There often is no setup or annual maintenance fee. Check with brokerage and mutual fund companies that sponsor SEPs.
Increasingly, Red States Embrace Marijuana: The Kiplinger Letter
The Kiplinger Letter Ohio becomes the 24th state to legalize marijuana for recreational use via a voter referendum.
By Sean Lengell Published
Charlie Munger of Berkshire Hathaway Has Died
Charlie Munger, vice chair of Berkshire Hathaway, died Tuesday, the company confirmed.
By Alexandra Svokos Published
Best Foreclosure Sites for Finding Properties
Making Your Money Last Wondering how to find foreclosed homes for sale for your next residence or to flip for a profit? These websites will guide you to foreclosures and real estate-owned properties to buy.
By Bob Niedt Published
Four Tips for Renting Out Your Home on Airbnb
real estate Here's what you should know before listing your home on Airbnb.
By Miriam Cross Published
Is a Medicare Advantage Plan Right for You?
Medicare Advantage plans can provide additional benefits beneficiaries can't get through original Medicare for no or a low monthly premium. But there are downsides to this insurance too.
By Jackie Stewart Published
What You Must Know About the Different Parts of Medicare
Medicare Medicare can be complicated but we've got you covered. Here is a quick guide to the different benefits provided through each part.
By Jackie Stewart Last updated
Retirees, It's Not Too Late to Buy Life Insurance
life insurance Improvements in underwriting have made it easier to qualify for life insurance, which can be a useful estate-planning tool.
By David Rodeck Published
Best Banks for Retirees
banking Kiplinger's 2023 list of the best banks for retirees.
By Lisa Gerstner Published
As the Market Falls, New Retirees Need a Plan
retirement If you’re in the early stages of your retirement, you’re likely in a rough spot watching your portfolio shrink. We have some strategies to make the best of things.
By David Rodeck Published
Retirees: Your Next Companion May Be a Robot
happy retirement Robots may help fill the gap left by a shortage of humans to help older adults live independently.
By Alina Tugend Published