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Self-Employed? Check Out These 3 Retirement Planning Options

Filed under: Retirement, Supplemental Retirement Income

If you’re self-employed, you probably don’t have time to think about many things besides your business. After all, you wear a lot of hats. You’re the product designer, salesperson, marketer and maybe even the accountant. Even new insurance options for your business may be over retirement planning on your list of priorities.

It should be a priority, though. As a self-employed person, you don’t have the benefit of receiving matching contributions from your employer. That makes it even more important for you to make your own contributions toward your financial future.

Fortunately, there are several options that can help you plan for retirement and ensure you live out your non-working years comfortably. Below are three retirement options you may want to consider if you’re self-employed:


Solo 401(k)

This option is similar to an employer-sponsored 401(k) plan. Also called an individual 401(k) or a uni-401(k), the solo 401(k) mirrors traditional plans in that both have $18,000 contribution limits for workers age 49 and under. Further, individuals 50 and over can do additional catch-up contributions of $6,000. That means for some self-employed people nearing retirement, the total contribution could be as high as $24,000. Additionally, these are all pretax dollars, which means by setting up and contributing to a solo 401(k), you may be able to limit your tax liabilities.1

Also, self-employed individuals have the ability to contribute 25 percent of their business’s earnings on top of their standard contribution to a solo 401(k). That makes the maximum contribution $53,000 for workers age 49 and under and $59,000 for those age 50 and up.1



The savings incentive match plan for employees (SIMPLE) IRA can be a good option for businesses with fewer than 100 employees. SIMPLE IRAs are similar to solo 401(k) plans in that they both allow your investments to grow on a tax-deferred basis, and they allow you to make catch-up contributions if you are 50 or older. In 2016 the SIMPLE IRA contribution limit is $12,500, with a $3,000 additional catch-up contribution for those age 50 and older.2

One potential drawback to the SIMPLE IRA is that you must make a matching contribution to employee participants. You can either match up to 3 percent of their contribution or make a 2 percent contribution regardless of whether they contribute.3



Similar to the SIMPLE IRA, the simplified employee pension (SEP) IRA might be a good idea for businesses with only a few employees. It has sizable contribution limits, which means you may be able to save a significant amount of money in a very short period of time.

In 2016 you can contribute up to the lesser of 25 percent of your income or $53,000. If you have employees, however, you must make the same percentage contribution to their plans as you make to your own. For instance, if you contribute 25 percent of your income to the plan, you must also contribute 25 percent of income to each of your employees’ plans.4

Ready to develop your retirement savings strategy? Let’s talk about it. Contact us at Ambrose Financial & Insurance Services for more information. We welcome the chance to help you analyze any remaining questions and develop a strategy. Let’s start the conversation today.







This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.

16160 – 2016/10/18