Self-Employed Retirement Plans
Self-employed individuals have a couple of option when it comes to retirement plans. One of these plans is, Solo 401(K) plan. This plan is suitable for individuals with no employees and substantial self-employment earned income; it is worth to note that, self-employed individuals don’t have compensation rather earned income for qualified plan purposes. Moreover, employer is considered employee for qualified plan purposes. Going back, by law borrowing from Solo 401(K) is allowed — up to half the amount in the plan or $50,000, whichever is less.
Simplified employee pension plan (SEP) are a type of individual qualified retirement plans under which contributions are invested into traditional IRA account.
Saving incentive Match Plans for employees (SIMPLEs) were enacted in order to provide small business with a less costly means of proving a qualified differed compensation plan for their employees. It can be formed either as SIMPLE IRA or SIMPLE 401(K) plans.
Question- The last thing self-employed individuals worry about when running their business is setting up a retirement plan. They already have so much to do, and adding retirement plan to their plate can be too much. Do you think this is a valid excuse to not set up a retirement plan? Do you think they should put more effort in setting up qualified plan, and why?