Are you a small business owner? Here is a brief overview of three main types of tax-deferred retirement plans to consider, which are suitable for self-employed individuals, independent contractors, 1099 earned income recipients, LLCs, incorporations, partnerships, and sole proprietors.
Individual 401k
Also known as a Solo 401k, this plan is one of the most popular choices for those who are self-employed. You are allowed to borrow against it.
Who is it for? Sole Proprietors
Benefits: Allows for the highest contribution amount
Max. contribution:
Salary deferrals: up to $16,500; for those over 50, it is $22,000
Employers contributions: up to 25% of compensation total must not exceed $49,000; or $54,500 if age 50 or more
Annual fees: About $20
Plan setup deadline: December 31
SEP-IRA
Simplified Employee Pension Plans are also a popular choice. These plans have very little administration and a tax filing is not required. You cannot borrow against a SEP-IRA.
Who is it for? Self-employed individuals and small business owners
Benefits: Inexpensive, easy to set up and maintain
Max. contribution: 25% of compensation or $49,000 (whichever is less)
Annual fees: About $20
Plan setup deadline: Company’s tax filing deadline
SIMPLE IRA
A Savings Incentive Match Plan for Employees is not as complex as a 401k, but offers more than a SEP-IRA.
Who is it for? Self-employed individuals; small businesses with up to 100 employees
Benefits: Salary deferral plan with both employer and employee contributions
Max. contribution:
Salary deferrals: up to $11,500 per year
Employer matching: dollar-for-dollar match of salary deferrals, up to 3% of participants compensation – or – employer nonelective: 2% of each eligible employee’s compensation
Annual fees: About $20
Plan setup deadline: Anytime prior to October 1 of each calendar year
For more in information please visit:
Fidelity Retirement Comparison Chart
Tamara graduated from Southern Methodist University with a degree in Computer Science and Old Dominion University with an MBA. She started Apollo Hosting, Inc. in 1999 and sold it to Endurance International 10 years later. She also started and sold two other companies before starting Press8 Telecom in 2006. She lives with her husband and two children in Austin, TX.
