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Top Five Retirement Savings Alternatives For The Self-Employed

There are plenty of perks for the self-employed. Putting your money aside for your retirement and emergency situations is completely in your hands, and you can have total control over how much you save by the time you call it a day. Here are some smart options that you can go through to make sure that you will get hold of your retirement savings whenever you require. Flying solo has its own benefits. Choose from these top five alternatives to retirement savings to retire with complete peace of mind.

Taxable Accounts

The simplest way to stack up retirement savings is to open up a taxable account through a financial entity. In case you opt for a bank account, structuring up a brokerage relationship, putting your money into a mutual fund institution, or getting hold of a vanilla taxable account provides you with the flexibility you require to gain access to your money. The negative aspect of regular accounts is that you need to shell out taxes, but that certainly can’t prove to be a burden for long-term investors.

Simple IRAs

The Simple IRAs allows you to save as much as nearly $13,000 if you haven’t yet reached 50. In addition to that, if you’re at 50 years of age, you receive an extra $3,000 as a catch-up contribution which takes the total amount to almost $16,000.  Apart from these employer-based contributions, you can opt for a non-matching contribution of 2% of your total salary which can go up to an amount of approximately $6,000 every year.

Ordinary IRA

If you are self-employed, the earnings that you rake in through your business get counted as earned income. For the running year, the maximum contribution to an IRA is limited to $5,500 if you haven’t yet attained 50, and $6,500 if you are above. If you go for a traditional IRA, your contribution will be tax-deductible, while those individuals who opt for Roth IRAs will receive the opportunity to savor a tax-free treatment while the money remains in the bank account.


Simplified Employee Pension or SEP can provide more potentiality to high-earning individuals as far as saving is concerned. The SEP IRA is said to have higher contribution limits, letting you contribute one-fourth of your total compensation up to an amount of $55,000 in this year. For self-employed individuals, calculating the total compensation can prove to a bit cumbersome and tricky, too, as they have to account for the self-employment tax payment and SEP IRA contribution as well.

Solo 401(k)s

The solo 401(k)s provides a self-employed individual with the opportunity to set up their 401(k) plan account. The contribution is limited to an amount of $18,500 if you are under the age of 50, and nearly $25,000 if you are above that age. Aside from that, you are entitled to make employer contributions that are calculated at 20% of the adjusted profit rule which gets a mention under SEP IRAs.

Pick An Option That Suits You The Best

For some people, accentuating their retirement savings remains the primary objective, and solo 401(k)s are definitely the best choices. Besides delivering the best of both of both worlds, it allows the amalgamation of employer and employee contributions that can prove to be profitable and moneymaking for affluent entrepreneurs. If you are more inclined towards simplicity, you don’t need to run after a retirement option that’s completely business oriented. In that case, opting for a regular IRA or a taxable account can be beneficial if you know the smart ways of handling them.

You need to find out what’s best for your disposition and the situation that you are currently in. Whether you go all out and opt for a complex solo 401(k) or prefer to stick to a tried and tested taxable account, you will definitely be able to garner more savings besides investing in a way that can lead to a growth in your assets over a period of time. Do remember that being self-employed gives you the freedom that you always sought, but that doesn’t mean you will disregard your retirement savings. In addition to that, a pension plan is a guaranteed source of income, and setting it up with the help of a defined benefit plan is necessary. If you are self-employed, you can set it up on your own.

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