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Retirement Savings Plans for the Self-Employed

Just because you are self-employed doesn’t mean you should give up saving for retirement. There are several retirement savings plans for self-employed people, and some have easy terms for those individuals on tight budgets. 

Read on to learn the basics about each retirement plan and see which one is right for you. 

Retirement Savings Plans for the Self-Employed

self-employed individuals figuring out retirement plan

Self-employed people have several retirement savings plans designed especially for them:

1. One-Participant 401(k) Plan

Also known as a “Solo 410(k),” “Solo-k,” “Uni-k,” and “One-Participant K,” this popular retirement plan allows the self-employed to contribute as both an employee and an employer. Contributions are tax deferred just like any other employer sponsored 401(k) plan. 

2. Simplified Employee Pension (SEP) and Savings Incentive Match Plan for Employees (SIMPLE IRA Plan)

These plans function like typical IRAs but are designed for the self-employed who want to contribute more of their annual income to savings than IRAs allow. 

3. Profit-Sharing Plan  

Contributions to this plan are based on the company’s earnings rather than on a percentage of the workers’ incomes. There is no set amount that must be contributed annually into the accounts. If there is not enough company profit to make a contribution, no contribution is made.

4. Money Purchase Plan

Pre-determined mandatory annual contributions are deposited into workers’ accounts where they develop on a tax-deferred basis until withdrawal. 

Other Retirement Savings Options for the Self-Employed

self-employed learning more retirement options

While many self-employed individuals utilize the above plans, be aware that many retirement plans can restrict your ability to access the funds until retirement. Shorter-term savings products may offer several advantages to saving for retirement without restricting your money for years to come.

Check out these options:

Savings Accounts can often be the simplest way to save money. Funds can be directly deposited or automatically transferred from your checking account at regular intervals to make saving a seamless transaction.

Money Market Accounts are a type of savings account that typically allows you to write checks.

Certificates of Deposit (CDs) earn interest for intervals of time, often ranging from three to 60 months.

Individual Retirement Accounts (IRAs) are a tax advantaged means of saving for retirement.

The decision to choose a retirement plan is ultimately yours, and you should consult a tax advisor or financial planner before you open a retirement savings account.

More Help with Retirement Plan Options

When you are ready to start saving for retirement, contact the banking representatives at Synchrony Bank. We offer savings products with easy terms to make saving convenient and simple for you. We have several savings account types that can help you meet your retirement goals, including IRAs. You should consult your financial or tax advisor before contributing to an IRA.

If you have more questions about retirement plan options for the self-employed, call Synchrony Bank at 1-844-345-5789.

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Sources:

IRS: https://www.irs.gov/retirement-plans/one-participant-401k-plans

Investopedia: http://www.investopedia.com/articles/personal-finance/112414/retirement-plans-selfemployed.asp


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