Options for Self-Employment
From 360 Degrees of Financial Literacy, American Institute of CPAs & Florida Institute of CPAs
These plans, which are usually easy and relatively inexpensive to set up, also allow your money to grow tax-free over time. They include:
- Solo 401(k). Sole proprietors can make both employer and employee contributions to traditional or Roth Solo 401(k)s in amounts that are significantly higher than those for other retirement vehicles.
- SEP-IRA. Simplified Employee Pension (SEP) IRAs also have high contribution limits. Contributions are deductible and withdrawals after age 59½ are taxable.
- SIMPLE IRA. These plans may appeal to small businesses with fewer than 100 people that want to offer employees a retirement savings option and are ready to commit to making employer contributions to the plans. Contributions are deductible and withdrawals in retirement are taxable.
Consult your financial or tax advisor to help decide which is best for you.