Find the Right Retirement Plan for Your Self-Employed Business

As a self-employed person, you're responsible for your own retirement savings as you don’t have an employer to save for you. That's why it's important to choose the right retirement plan investment option for your situation. Here are three of the best options:

1. Solo 401(k)

A solo 401(k) is a great option for self-employed people with no employees or just a spouse. You can contribute up to $22,500 in 2023 ($30,000 if you're 50 or older). With a solo 401(k), you can choose to make pre-tax or Roth contributions. Pre-tax contributions will reduce your taxable income now, while Roth contributions will grow tax-free in the future.

2. SIMPLE IRA

A SIMPLE IRA is a good option for self-employed people with up to 100 employees. You can contribute up to $15,500 in 2023 ($3,500 more if you're 50 or older). With a SIMPLE IRA, you can choose to make either a 2% fixed contribution or a 3% matching contribution.

Here are some of the key differences between a SIMPLE IRA and a 401(k):

• Contribution limits: The contribution limit for a SIMPLE IRA is lower than the contribution limit for a 401(k).

• Employer matching: A SIMPLE IRA requires employers to make either a 2% fixed contribution or a 3% matching contribution, while a 401(k) does not have this requirement.

• Employer administration: SIMPLE IRAs are easier for employers to administer than 401(k)s and typically much cheaper.

3. SEP IRA

A SEP IRA is a good option for self-employed people with just a few employees that have a lower income or someone with no employees at all. You can contribute up to 25% of your net self-employment income, up to a maximum of $61,000 in 2023. With a SEP IRA, you can only make pre-tax contributions.

Which retirement plan is right for you?

The best retirement plan for you will depend on your individual circumstances. Here are some factors to consider:

• Your age: If you're younger, you may want to choose a plan that allows you to contribute more money, such as a solo 401(k).

• Your income: If you have a high income, you may want to choose a plan that offers tax deductions, such as a 401(k).

• Your investment goals: Consider your risk tolerance and investment goals when choosing a retirement plan.

Here are some other things to keep in mind when choosing a retirement plan:

• Investment options: Make sure the plan offers investment options that align with your investment goals.

• Fees: Compare the fees of different plans before you choose one.

• Portability: Make sure you can transfer your money to another plan if you change jobs or stop being self-employed.

The earlier you start saving for retirement, the more time your money has to grow. So don't wait, start planning for your retirement today!

*Written by Michael Custer with AI rephrasing

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.