Entrepreneurs are the backbone of our economy.
They are among the most daring, innovative, and hard-working people in America. It starts out as a simple idea and blossoms into a full-fledged passion, which in turn, explodes into a self-managed business.
The success of our entrepreneurs is directly correlated to the success of our society. Without them, we would be much worse off. It’s for that reason that we’ve created this blog, in order to help those entrepreneurs and self-employed find some of the available savings plans out there.
Because even though they might be in control of their own business, be their own boss, and get to decide when and where to retire on their own terms, that doesn’t mean it’s not important to plan for when that day finally comes.
The fact of the matter is that many entrepreneurs or self-employed business people don’t access to an employer-sponsored 401K or other retirement account.
With that being said, here are a few options which you can explore if you are a self-employed business owner in need of a stable savings option.
Traditional Or Roth IRA
Individual Retirement Accounts (IRA) are available to everyone, everywhere. That’s one of the best parts about them. With a traditional IRA, you get the option to make tax-deferred contributions, which will then grow with interest, until you reach the age in which you can start withdrawing your money. With a Roth IRA, you get the perk of having your contributions taxed sooner, so that they aren’t impacted by Uncle Sam when you take your withdrawals later in life. This is a good option if you think you’ll be in a higher tax bracket, for example.
While an IRA is a great savings tool for the self-employed, you should also be wary that the contribution limits are fairly low. You can only contribute around $5,500 annually (if under age 50), but something is still a whole lot better than nothing.
Even though an employer-sponsored 401K might not be available, there still is an option to contribute to a similar type of account.
With a solo 401K, contributors get the option to contribute even more money than a regular 401K would allow them, because they are both the employer and the employee. However, this option is only available if you are the lone employee of your own company (other than your spouse), so it might not be available for all business owners.
Solo 401Ks, when available, are great because of the aforementioned contribution amounts (which can reach $53,000 annually) and they offer tax-deferred growth. If you are the sole proprietor and employee of your own business, this is definitely a great option to look into.
Simplified Employee Pension (SEP IRA)
This is another type of IRA account which is available for self-employed business owners. It’s simple to set up, all it takes is a few scribbles here and there, and there are no reporting requirements you have to make to the IRS throughout the year.
As with the Solo 401K, a SEP allows for significantly higher contribution limits, often as high as 25 percent of the income you reported paying yourself on your W-2 form for the year. Again, these contributions grow in a tax-deferred manner and accumulate interest as they mature. However, this is another instance in which you need to be wary of having too many employees, as you will be required to include them in your retirement account.
Simple is more than just a description of what it takes to get this account started. It stands for a Savings Incentive Match Plan For Employees.
SIMPLE IRA plans are designed specifically with entrepreneurs and small business owners in mind. It allows you to offer a retirement benefit to your employees (businesses with no more than 100 employees, that is), and allows them to make contributions of up to $11,500 annually. You can also buy into the plan yourself, though there are generally requirements to match the contributions of your employees between 2-3 percent of their salaries.
Again, it’s a great perk and a simple savings method to improve morale and enthusiasm.
High Return Investments
Another route you might want to look into as a self-employed business owner is to make annuity investments.
With an annuity, you make a simple principal payment and begin to receive interest payments immediately (unless you want to compound your earnings by reinvesting them). This lasts all the way through the maturity of your note, which could be anywhere from two years to 10 years to a lifetime. The choice is yours.
High return investments like this are a great way to supplement your income while diversifying your portfolio.
The best high return investment available to self-employed entrepreneurs young and old is the Tactical Wealth Fixed Income Fund. When compared to fixed annuities, the Fixed Income Fund blows them out of the water with significantly higher fixed interest rates, a simplified investment strategy which deals in the oldest asset in the world — real estate — and it helps to save you money by not requiring management fees or investor fees.
If you’re looking for a stable, consistent income with low risk and high returns, consider an investment in the Fixed Income Fund. We’re always here to help the self-employed.
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