Retirement Plans for the Self-Employed

Self-employed individuals do not have to forego participation in retirement plans. In fact, there are numerous options available to self-employed individuals. Among the most effective, and popular, retirement savings vehicles are:

• Qualified Plans (Keogh plans)
• Individual Retirement Accounts, including Roth IRAs (IRAs)
• Simplified Employee Pensions (SEPs)
• SIMPLE plans

As a general rule, you trade off simplicity in plan set-up and administration for the ability to make substantial contributions to the plan. For example, in 2013, the maximum contribution to a SIMPLE-IRA is $12,000, while that for a defined contribution plan is $51,000. So, if you want to accumulate money for retirement rapidly, the hassle of a defined benefit plan may be worth it. On the other hand, if rapid savings is not a priority, but flexibility is, then an IRA might be a better option.