Retirement Planning for the Self-Employed

By Brent Meyer — SafeMoney.com Founder & Editor Reviewed by Licensed Financial Professionals  |  SafeMoney.com — Trusted Since 2011  |  Updated Regularly Quick Answer: Explore safe money strategies for self-employed retirement planning. Secure your future with guaranteed solutions. Learn more at SafeMoney.com. In the past, we’ve talked about the importance of being prepared for retirement. Of course preparation is different for everyone. For one, women will have different retirement needs and goals than men. It also depends on what employment capacity you’re in. If you’re employed by a large company, for instance, you may have a retirement pension plan via your employer (though these sorts of perks from employers are disappearing). But what about planning for retirement if you’re self-employed? According to various data sources, there are roughly 10 million self-employed Americans – from business owners and independent contributors to freelancing professionals. In a recent TD Ameritrade survey, around 55% reported they’re behind on retirement savings. On the whole, baby boomers have an average windfall of being $335,000 down from their retirement savings objective. What, then, are the self-employed to do? Read on for some helpful tips. Different Options for Self-Employed Americans As a baseline, financial professionals recommend putting away tens of thousands of dollars if you can. But for many self-employed individuals, this may not be viable – putting away a few thousand in a retirement account will still help toward accumulating sufficient retirement funds. There are a number of vehicles available to the self-employed in the form of retirement accounts : • Roth IRAs – Roth IRAs are an ideal vehicle for many people, as account distributions once you turn 59.5 years old are tax-free. Contributions themselves aren’t tax-deductible, but in contrast traditional IRA account distributions are taxable. So there’s a tradeoff. The contribution limit is set at $5,500 for 2015 and 2016 – for people over 50, it’s set at $6,500. • Traditional IRAs – In a traditional IRA, self-employed persons have the benefit of their contributions being fully deductible – however, they can’t have a spouse covered by a workforce retirement plan. In addition, contributions can’t exceed gross income. It’s also important to keep in mind distributions with this account are taxable once you hit 59.5. • SEP IRAs – If your income exceeds $131,000, you can’t contribut