One of the advantages of working for someone else is that they will normally have some sort of retirement plan set up for you. But for all those who work for themselves they do not have this advantage.
In order to counter this you’ll have to set up your own retirement plan. Here are a few different types of plans.
1. Individual 401k plans
An individual 401k or solo 401k plan is a plan that is only available to small business owners. In order to participate you must own a small business which you are the only full time employee, with the acception of a spouse.
The plan has the same basic rules as a traditional 401k plan. But it does have the side benefit of letting you invest up to 25% of your business’s profits into the plan as long as your total contribution does not exceed the limits for individual 401k plan.
2. Traditional IRA
What’s a Traditional IRA? This is a plan that is open to all people who have earned income and do not make too much money. The IRA works similar to a 401k plan only it has tighter contribution limits and in most cases more investment options. Even if you are not self employed this can be a great plan to look at to use in addition to a traditional 401k plan.
3. Roth IRA
How do Roth IRAs work? This plan is similar to the other plans only with one major difference; you pay taxes up front to save later! Most retirement plans let you defer your taxes for the future; however with a Roth IRA you do not get that benefit. Instead you must pay your taxes when you start investing by all of the interest that you earn on that money is tax free provided you follow all of the rules. If you believe that your tax rate will increase in the future then this could be the perfect plan for you..