5 Retirement Plan Options for Entrepreneurs
Entrepreneurs sometimes come up short when it comes to planning their retirement. Unlike company-sponsored employees who have their retirement plans secured in the form of 401(k) or 403(b), entrepreneurs need to establish their own ways to safeguard enough retirement nest egg for the future.
With the volatile income of freelancers, start-up entrepreneurs, and small business owners, retirement plans tend to be neglected. In a survey by Manta, an online community for small businesses, it was found that 34% of entrepreneurs do not have retirement savings plans.
Retirement is inevitable, so it is best to ensure that you will have a financially-secured life in the later years. Here are some retirement plan options to consider:
Traditional or Roth IRA
Traditional IRA uses pre-tax money and withdrawals are tax-deductible. On the other hand, Roth IRA is a special type of retirement account that uses after-tax money, making future withdrawals tax-free.
For both Traditional and Roth IRAs, contributions are capped at $6,000 yearly. For those who are over 50, maximum contributions are $7,000 per year for 2020.
Solo 401(k) lets you enjoy the benefits of the conventional 4019(k) plan, designed to benefit the business owner with no employees, and your spouse can even join the plan.
Participants are allowed to contribute up to $19,500 for 2020. If you are over age 50, catch-up contributions of up to $6,500 for 2020 are allowed. If your spouse is part of the plan, you may double up your contributions.
This plan also has loan provisions that allow the participants to borrow up to 50% of the current value of his or her account balance. Be reminded that participants must file an annual report if their assets reach over $250,000.
Simplified Employee Pension (SEP) IRA
This type of individual retirement account (IRA) benefits sole-proprietors or small business owners. SEP-IRA plan benefits both employers and employees, allowing the contribution of up to 25 percent of your income, or a maximum of $57,000 for 2020.
SEP-IRA contributions are tax-deductible, and this plan is popular as it is simple to start, has low start-up costs. It is also easy to manage and has no filing requirements for the employer. The flexibility of annual contributions is also an advantage.
If you do not have any existing retirement plans yet, you might want to consider this. Savings Incentive Match PLan for Employees (SIMPLE) IRA is a start-up retirement savings plan perfect for small businesses with not more than 100 employees.
Starting up a SIMPLE IRA plan is not costly, but the employer must match the contribution of his or her employees, up to 3 percent of their salary. The contribution is limited to $13,000. But if you are over 50, the maximum contribution is $16,000.
Manage Your Savings
Most financial advisors suggest starting saving 10 to 15 percent of your income in your 20s. Planning your budget wisely for retirement is a must. Should you need assistance in planning your finances, it is best to consult with a financial advisor.
More in Retirement
Experts’ Super-tricks to Save Six Times Your Income by 50
By the time you’re 50, you’re likely more financially stable than you were in your youthful years. But at this phase...December 9, 2020
The Iconic Hilton House is Up On the Market for $75 Million
In Los Angeles, the Jay Paley house, which has been the home to the Hilton family for more than 5 decades,...December 9, 2020
Tips That’ll Make You an Investment Master In No Time!
Investing is often considered to be complicated and risk-bearing because of unhappy stories we’ve heard from failed investors. But isn’t failing a part...December 8, 2020
Paul Simon Relists His Connecticut Estate For $11.9 Million
From sports to music to Hollywood, keeping entertainment aside, if there’s one thing that attracts us towards celebrities, it’s their lifestyle! Unlike...December 6, 2020
Why and How to Get Rid of Your Mortgage Faster!
Most people prefer to go with the flow; thus, they keep paying mortgages for years and years to come. It is...December 4, 2020
The Holiday Season is No Reason to Land Yourself in Debt
Everyone is eagerly anticipating Thanksgiving and Christmas’s auspicious occasions to shed off the misery of the past year. The coronavirus hit...December 2, 2020
These Private Companies Achieved Within 10 Years What Others Took Decades to Do
Similar to the fast pace technology evolves these days, modern companies also experience a quicker rise to financial success, especially when...November 30, 2020
Priscilla Presley Selling Her Home of 45 Years and it Comes with a Good Story
Priscilla Presley is primarily known for being the King’s wife. So, it’s safe to say that many Elvis Presley fans would...November 30, 2020
Wondering If You Can Build a House under $40,000 ? Here’s How It Is Possible
Due to the rising housing and real estate costs, a lot of people today are achieving their dreams of becoming a...November 30, 2020