Self-employed retirement plans can provide the best option for small business owners or self employed individuals. There are four types to choose from: SEP IRA, SIMPLE IRA, Individual 401k or Keogh Plan. Holders can be assured that there personal finances will be well managed.
1. SEP IRA
SEP, or Simplified Employee Pension plan, is a retirement plan that gives a simplified contribution method. A SEP Plan is like a traditional IRA but the limit of contribution is much higher. This type of plan is one of the easiest to open and to maintain.
2. SIMPLE Plan
SIMPLE Plan, or Savings Incentive Match Plan for Employees plan, is a deferral of compensation plan. It is also easy to open and maintain, but has lower contribution limits. This plan is best for businesses on the sideline with owners who have other income sources as it allows them to set aside a larger percentage of profit to be placed on retirement from a lower net income.
3. Solo 401(k)
The Solo 401(k) or Single Participant 401(k) Plan is a newly added retirement plan. Like the other self-employed retirement plans, it is also easy to open and requires less maintenance. This plan is only for the individual business owner and her spouse, who have no fulltime employees.
4. Keogh Plan
There are two types of the Keogh Plan: Defined Contribution and Defined Benefits. A Defined Contribution is based on a compensation percentage, while a Defined Benefits decides on a fixed amount as a benefit for retirement. An account owner with large net profits may prefer this retirement plan as contributions can exceed $100,000.