Welcome to the world of self-employment. Being an entrepreneur takes a lot of hard work and dedication. Since you are officially your own boss, it is now more important than ever to make sure that you are putting something away to prepare for retirement. Gone are the days when your employer would contribute for you and although it might seem like a challenge to save when you're just starting out, if you make the effort to invest just a little each month, the end result can be very rewarding. Here are some ways you can invest in your retirement, while running your own business.
Although there are a variety of self-employment retirement plans that exist, you will find that some plans might be more suitable for you than others. The Individual Retirement Account (IRA) is the most common and best option for saving for your retirement. You can simply open one of these accounts with a financial institution and have money transferred to your IRA via your checking account. If you have no employees working for you, the SEP IRA and SIMPLE IRA offer many investment advantages. Be aware, however, that if you take on employees, under either of these plans, you will have to match contributions by a certain percentage.
Other options that are available to you are the self-employed 401(k) and the Solo 401(k). The Solo 401(k) is a very flexible plan that allows to you to contribute larger amounts than the above-mentioned IRAs, but is only an option, it you have no other employee. One advantage under this plan is if you do have a spouse, they too can contribute under this plan. Another investment favorite is the Roth IRA, which allows your earnings to grow tax-free and additionally you are not penalized if you have to withdraw money. Even though this money is put away for retirement, if an emergency does come up, you know that you don't have to pay a fee to withdraw your money if it is needed.
Whether you have been in business for yourself for a long time, or you are recently self-employed, it's important to get into the habit of saving for your retirement as soon as possible. And you don't have to contribute large amounts. The key is just to put something away consistently. When looking for the right retirement plan for you, it is advised that you start with your financial institution to review all of your options. Additionally, if you don't have a financial planner, you should consider consulting one, as they can be a great resource in helping you prepare for your financial future.
