| g for retirement is even more important for | | | | reporting requirements. You can contribute up to |
| solo-entrepreneurs because you don’t | | | | $10,000 to a Simple IRA, with an employer match |
| have a company sponsored pension plan or | | | | of up to 3%. Contributions are tax-deductible, and |
| matching 401K contributions to rely on. There are | | | | Simple IRAs also enjoy low annual fees. |
| many retirement plans available to self employed | | | | Employees are allowed to contribute to Simple |
| individuals and small businesses. Which one is right | | | | plans, and a company match is mandatory. If you |
| for you? | | | | have a lower salary (or self-employment income) |
| Here is just a sample of the retirement plans | | | | in your small business, a Simple IRA allows you to |
| available to solo-preneurs and small businesses: | | | | put more away towards your retirement than |
| Roth IRA – although this is not just for | | | | other plans. |
| solo-preneurs, this is the first place you should | | | | Solo 401K – for small businesses with no |
| look to save if you are just starting to save for | | | | employees, the solo-401K allows you to put the |
| retirement (or resuming to save after starting a | | | | maximum amount away, with less cost and less |
| business). Roth IRAs are low-cost, very flexible, | | | | reporting requirements than a traditional 401K. |
| and allow you to grow money tax-free as long as | | | | Similar to a SEP IRA, contributions max out at |
| you follow the distribution rules. Contributions can | | | | $44,000. However, unlike a SEP IRA, participants |
| be made up to $4,000, and can be withdrawn at | | | | in a Solo-401K can contribute up to 100% of the |
| any time without tax or penalty (earnings | | | | first $15,000 of compensation or self-employment |
| withdrawn may be subject to penalty and tax if | | | | income, and an additional amount up to 25% of |
| withdrawn before age 59 ½ and certain | | | | your compensation. This is important because it |
| other conditions are not met). | | | | allows you to save substantially more than a SEP |
| SEP IRA – if you’re maxing out | | | | IRA, if your compensation is less than $220,000 |
| your Roth IRA, and are ready to save more, a | | | | per year. A solo-401K is not appropriate for small |
| SEP IRA allows you to save up to 25% of your | | | | business with employees or expecting to add |
| compensation (20% of your self-employment | | | | employees. |
| income) for a maximum of $44,000 per year. | | | | There’s no one best plan for all small |
| Contributions are tax-deductible, and SEP IRAs | | | | businesses. The best plan for you will depend on |
| have low maintenance fees. Contributions can be | | | | many factors, such as whether you have |
| made for employees also, but employees cannot | | | | employees or not, how much you want to |
| contribute to their own SEP IRA. This is a good | | | | contribute each year, how much time you want |
| choice if you just have a handful of employees | | | | to spend administering the plan, etc. To get more |
| and are looking for a low-cost way to save for | | | | information about small business retirement plans, |
| your own and your employees’ | | | | contact a no-load mutual fund company, a |
| retirement. | | | | discount brokerage company or a fee-only |
| Simple IRA – a Simple plan offers many of | | | | financial planner. |
| the benefits of a 401K, but with less IRS | | | | |