Preparing
for Retirement: Self-Employment
Self-employment offers special challenges but
also special advantages in
saving for retirement. A Keogh plan is a tax-deferred
retirement plan,
similar to a 401(k), except
that it is geared toward self-employed individuals.
If you are
self-employed, you can contribute
up to $40,000 per year to a Keogh plan.
There
are two different Keogh
plans to choose from: a profit
sharing plan, with a variable
contribution rate and the availability
of in-service withdrawals;
or a money purchase plan,
with a fixed annual contribution
rate.
Self-employed people may choose instead
to set up a Simplified Employee
Pension,
also known as a SEP-IRA,
to which they can contribute
15% of their income, up to
$40,000 a year. The SEP-IRA does not require
special paperwork and annual
filings, and so
it is a less cumbersome
alternative. Also available
to small-business employers
with employees are SIMPLE
plans and SIMPLE 401(k) plans. Check
with your tax adviser to
see which type of plan would
be best for you and your business. |
