Retirement Plan Options for Self-Employed WAHMs
If you’re someone who is self-employed, then you know already know that it’s wonderful to be in a position where you are in control of your professional future. However, being self-employed can also bring forth a lot of time-consuming demands—ones that can sometimes keep you from planning ahead when it comes to taking care of financial matters such as paying your taxes on time and even preparing for your retirement. This can especially be the case when you’re a Work-At-Home-Mom who is trying to juggle both your professional and personal life.
If you have been wondering about what the retirement plan options are for you, we have some great ones below:
Defined Benefit Plans. Something that all of us can benefit from is speaking to people our grandparents’ age about how they prepared for their retirement. Many of them had what is known as a pension plan that allows them to now receive a check on a monthly basis. That’s basically what a Defined Benefit Plan is. Sure, getting a steady check sounds pretty good, but the thing to keep in mind about these plans is not only is are they time consuming and pretty costly to set up, but the monthly contributions that you make now for them have no flexibility. Whatever you signed up to pay is mandatory. Therefore, it’s definitely wise to talk this over with a financial or pension planner before making any commitments.
401(K). One kind of retirement plan that most of us are familiar with is a 401(K). When you are self-employed, you are able to set this up to where you can (currently) contribute about $17,500 plus 25 percent of your business income into it. The main reason why a lot of people prefer this plan is because you can customize how you are able to access the funds that are in it just in case you experience an unexpected hardship or you need to pay off a loan.
Savings Incentive Match Plan for Employees. Another option to consider is something that is known as a Simple IRA Plan. With this option, you are able to put all of your net earnings into our retirement plan. Currently, the cap on this option is $12,000 (plus an additional $2,500 if you’re over the age of 50).
Simplified Employee Pension. A Simplified Employee Pension is something that more and more self-employed people are signing up for. That’s because they are pretty easy to set up and you can start one at your bank or even through your insurance company. Currently, you can contribute up to 25 percent of your net earnings up to 51,000.
Money Purchase Plan. If you have some people who work for you, then you might want to consider a Money Purchase Plan. Basically what this does is require that you, as the employer, make a certain amount of contributions to your employees. Many people who choose this plan will contribute 5-10 percent of each eligible employee’s pay towards it. Due the fact that the administrative costs for setting this plan up can be higher than other retirement plans, you might want to speak with a business broker like Selby Associates or a financial planning company in your area about how to create one that is just right for you.
For more information on all of these plans, go to IRS.gov and put “Retirement Plans for Self-Employed People” in the search field.
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