There are numerous types of retirement plans which can be used by employees, like 401(k) plans, but there are also opportunities for self-employed individuals to plan for retirement through options as well, and there are many who are turning to IRAs as a way to begin saving for retirement. Business owners who may not have options from their employer are by no means in a situation where they cannot save for retirement as there are traditional IRA options, individual 401(k) plans, Roth IRAs, and Simplified Employee Pension (SEP) IRAs as well.
However, many of these retirement plans do offer both benefits and drawbacks when compared to one another, as some allow for contributions to be written off while others allow withdrawals to be accessed tax-free after a certain age is reached. Also, the retirement goals in individual has will also factor into the type of plan they choose, yet there are advisers that may further suggest that investors diversify their retirement portfolio, which would obviously require research into more than one of these retirement accounts.
Yet, when it comes to individuals who are self-employed, retirement goals, their financial position, and a variety of other factors can lead to one account being better than another, but options like the Simplified Employee Pension IRA allows for retirement planning for those who are self-employed or small business owners. As an example, a business owner who may only have one employee or a few employees, or an individual who happens to have freelance income, typically uses a SEP IRA as this does offer certain tax-deductible benefits for the investor. Similar to a traditional IRA, contributions made to a SEP IRA are tax-deductible, which can be beneficial for a business owner at the present time.
Also, this type of IRA can be advantageous due to the fact that there is a higher contribution limit when compared to traditional or Roth IRAs. While there are some advisers who say that any SEP IRA is typically best for a self-employed individual who as no plan to add additional workers, but they can also be helpful to businesses because they are easy to begin and do not require annual contributions, as some companies or self-employed individuals may not be able to contribute to this plan each year.
Obviously though, this is not the only type of IRA or retirement investment option that self-employed individuals have, but again, researching different options which may be better tailored for those who are self-employed or freelance workers can provide this type of opportunity to begin saving for retirement when an investor has a “nontraditional job.” Yet, retirement investors are often cautioned to heavily researched their opportunities and when possible diversify their retirement savings so that they can not only affordably contribute to these retirement accounts each year, but can also reach their financial goals for retirement.