Just because you’re on your own, doesn’t mean you don’t have retirement plan options. I’m going to break down different retirement plan options for solopreneurs.

Choosing a retirement plan as a self-employed person should be based on your earnings, business cash flows, tax situation and time frame. In this video, I’ll compare the various retirement plan options for solopreneurs so you can determine a retirement plan that is a fit for you.

I’ll review, Individual Retirement Accounts (IRAs), Simplified Employee Pensions (SEP IRAs) and Solo 401k options. They each have their pros and cons.

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Retirement is an important part of long-term financial planning, but as a solopreneur, you may not have access to the same retirement plan options as people who work for larger companies. However, that doesn’t mean you’re stuck without any options for retirement savings. In this article, we’ll explore some of the best retirement plan options for solopreneurs.

1. Individual Retirement Accounts (IRAs)
IRAs are a popular retirement savings option for individuals, including solopreneurs. You can choose either a traditional IRA or a Roth IRA. The main difference between the two is the tax treatment of contributions and withdrawals. With a traditional IRA, contributions are usually tax-deductible, but withdrawals are taxed as income. With a Roth IRA, contributions are made with after-tax dollars, but the withdrawals in retirement are tax-free. You can contribute up to $6,000 per year to an IRA if you’re under 50 years old, or up to $7,000 per year if you’re over 50.

2. Solo 401(k)
If you’re a solopreneur with no employees, a solo 401(k) is a great retirement plan option. A solo 401(k) is similar to a regular 401(k) plan that’s available to employees of larger companies, but it’s designed for self-employed individuals. With a solo 401(k), you can contribute up to $19,500 per year to the plan as an employee, plus up to 25% of your net self-employment income as an employer. The total combined contribution limit is $58,000 in 2021.

3. Simplified Employee Pension (SEP) IRA
A SEP IRA is another retirement plan option for self-employed individuals. Like a solo 401(k), a SEP IRA allows you to contribute up to 25% of your net self-employment income, with a maximum contribution limit of $58,000 in 2021. One advantage of a SEP IRA is that it’s easier to set up and administer than a solo 401(k), with fewer administrative costs.

4. Defined Benefit Plan
A defined benefit plan is a retirement plan that’s based on a fixed benefit formula rather than contributions. If you’re a solopreneur with high earnings, a defined benefit plan may be a good option for you. The contribution limits for a defined benefit plan are much higher than other retirement plan options, and the plan can provide a fixed income for retirement. However, defined benefit plans are more complex to set up and administer, and may require the help of a financial advisor.

In conclusion, solopreneurs have several retirement plan options to choose from, with varying levels of complexity and contribution limits. It’s important to consider your retirement goals and financial situation when choosing a plan, and to seek the help of a financial advisor if needed. By saving for retirement now, you can ensure a more comfortable and secure financial future for yourself.