Best Retirement Plans for Self-Employed

As a self-employed individual you need to save for your retirement. A good way is to get a good retirement plan. There are a few plans that are perfect for a sole proprietor or the self-employed. The process is simple complete a Form and deliver to the accredited receiver. Here are some retirement plans to consider.

Best Retirement plans for Self-Employed

401(k) plan

The 401 (k) plans is also referred to as the solo 401 k, uni-401 k or individual plan. The plans are exempted from discrimination testing because the only staff is your spouse. The plan allows annual salary deferrals of $18,000.

The plan accommodates an added provision of $6,000 for people older than 50 years. This is possible through a designated contributory scheme or on pre-tax bases. You could fashion the plan to access hardship distributions or account balance via loans. 

You can contribute 25% net earnings including salary deferrals. The pre-tax allows tax deferred growth and tax only on withdrawals. The scheme is flexible and accommodates spouse participation in the plan.

Simplified Employee Pension

The simplified employee pension SEP accommodates 25% of net earnings from self employment. You need to fill a one page form, Form-5305-SEP. This form is an individual retirement accounts contribution agreement.

You can obtain an IRS approved prototype of the SEP plan from accredited financial institutions and banks. All you need to do is approach an accredited financial institution and open a SEP-IRA. The advantage of this scheme includes high contributory limit, tax deferral and easy maintenance.

Savings Incentive Match Plan for Employees

The saving incentive match plan for employees is referred to as SIMPLE IRA Plan. You can contribute your net earning from self employment to the tune of $12,500.

If you are above 50 a provision allows additional $3000 and fixed contribution of 2%-3%. To benefit from the contributory scheme you have three options.

You can obtain the form from a designated financial institution or a plan administrative company. The Form-5304-SIMPLE which is the savings incentive match plan is not for use with a designated financial institution.

However the Form-5305-Simple is used with a designated financial institution. While the IRS approved prototype SIMPLE IRA plan are offered by banks, mutual fund managers and plan administration companies.

Where to File Savings Incentive Match Plan for Employees SIMPLE IRA Plan

To establish the plan there are three designated administrators. The Plans a accredited to certain financial institutions. The accredited financial institutions are mutual funds managers, plan administration companies and banks.

• financial institutions
• mutual funds managers
• plan administration companies
• banks

Other Contributory Plans

Other contributory plans include money purchase plan which requires a yearly contribution at a fixed percentage not exceeding 25%. Other plans are the profit sharing plan and defined benefit plans. The define benefit plan has the traditional pension plan, maximum annual benefit.

• money purchase plan
• profit sharing plan
• defined benefit plans
• traditional pension plan
• maximum annual benefit
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