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Top Five Ways to Save For Retirement as a Self-Employed Business Owner

Everyone thinks ahead to their retirement and hopes they will enjoy time with family and friends, vacation in beautiful places, and spend hours on their favorite hobbies. Having a retirement plan in place is a great way to ensure a fulfilling retirement as a self-employed agent or broker. Focusing on small business owner retirement strategies now can make a difference in the future when you decide to stop working.

September 10 is National 401(k) Day this year – the fiscally-focused holiday has been celebrated annually on the Friday following Labor Day since its establishment in 1996. That day was picked to give celebrants a focus on retirement after starting the week celebrating Labor Day.

As a self-employed business owner, your retirement and financial planning needs may differ from someone who works for a company – but having a plan is just as important regardless of your employment status.

There are plenty of retirement plans for self-employed people – read on to learn more about saving for retirement and how to reach your financial goals!


Saving for Retirement is Critical

Your financial security depends on how well you plan for retirement. Your debts, mortgage, and other liabilities need to be covered, as well as having funds for emergencies, medical expenses, and insurance. Of course, you want to enjoy your retirement, as well, so having enough cash to travel and spend time on hobbies should be part of your goal.


Top 5 Small Business Owner Retirement Strategies

Consider diversifying your financial plan by combining several of these ways to save for retirement.

Open a solo 401(k).

One type of retirement plan to consider as a self-employed individual is the solo 401(k). Also called an individual, one-participant, or self-employed 401(k), the solo 401(k) offers tax advantages for its owner. A self-employed individual can contribute to the plan as both employee and employer, allowing them to make higher contributions to the solo 401(k) than they could to a traditional or Roth IRA.


Consider a traditional or Roth IRA.

Another option for business owners is to open a traditional or Roth IRA. Business owners can purchase both plans, so either IRA could fit the savings needs of agents and brokers. Consider the contribution limits and tax consequences of withdrawals when you consider which IRA to open. Starting in the calendar year you turn 50, you can take advantage of catch-up contributions to your IRA and 401(k) – if you couldn’t save as much as you would have liked in your younger years, you can contribute more without penalty starting at age 50.


Set up a Simplified Employee Pension (SEP) Plan.

While it sounds complex, a Simplified Employee Pension (SEP) plan is a way to save for retirement that can be used by employers of any size, even self-employed individuals. SEP Plans have low set-up costs, and you can contribute up to 25% of each employee’s pay to the retirement plan. The IRS has a form you can use to structure your SEP Plan if you decide to pursue it.


Set a retirement goal and stick with it.

This advice sounds simple, but many people don’t set a financial goal for their retirement. Without having a goal in mind, you may not contribute as much as you would if you set a goal and stick to it. Meeting with your financial advisor can help you form an idea of how much you will need for your retirement, but it depends on how you want to live in your retirement years. Will you travel, support grandchildren, or sell your family home? It is helpful to consider your needs and wants when setting your retirement goal.


Use National 401(k) Day to learn more about small business owner retirement strategies and retirement plans for self-employed individuals.

National 401(k) day serves as an annual reminder to plan for our futures. If you are self-employed, don’t neglect this critical step – retirement planning is a vital part of your financial health. Peace of mind comes from being prepared for the realities of life, including a time when you want to slow down and enjoy your life of hard work. Spend time this September 10 reviewing your retirement plan – if it is not up to speed, now is the time to purchase a 401(k) or another savings fund.

Whichever methods you use to plan for retirement, being proactive in your planning is a best practice – don’t be one of the many Americans without any retirement savings.


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