Self-Employed Retirement Plans

Retirement Plan Options for Self-Employed or Small Business

If you are self-employed or own a very small business with a few employees, you probably have so much on your plate, it's easy to neglect your retirement. But you should try to carve out some time as well as some income to focus on your future needs. Fortunately, there are a few self-employed retirement plans that make it easy—and even financially smart—to save regularly. The seemingly small differences in these plans can have a big impact depending on your business and your unique needs. Take some time to compare and find the right plan for you and your small business.


Golden eggs in a nest next to the word 'IRA'
Geri Lavrov / Getty Images

A SEP or simplified employee pension is an easy account to set up, administer and use. Participants can contribute as much as 20 percent of net annual self-employment income before taxes, up to a maximum of  $52,000 in 2014 or $53,000 in 2015. Plus, if you participate in another plan, such as a workplace 401(k), you can contribute to both. This makes SEP IRAs a great option for full-time employees with freelance or contract work on the side. SEPs get a bit more complicated, and less of a good idea, if you have employees.


See more:
SEP IRA Contribution Limits 2013

SEP IRA Contribution Limits 2014

SEP IRA Contribution Limits 2015



SIMPLE stands for savings incentive match for employees. This is a plan that business with 100 employees or less can use. And compared to a traditional 401(k), the SIMPLE really is a simpler option. But only if you intend to match your employees' contributions. With a SIMPLE, employers much match employee contributions up to 3 percent of salary (if an employee doesn't make contributions, you still must contribute 2 percent of their salary). Contribution limits with a SIMPLE are lower than the limits allowed in a 401(k) plan. But for some business owners, the simplicity may be worth the difference.

See more:
SIMPLE IRA Contribution Limits 2013

SIMPLE IRA Contribution Limits 2014

SIMPLE IRA Contribution Limits 2015

Solo 401(k)

If you are a solo business owner, meaning no other employees except maybe a spouse, a solo 401(k) is just that: your own personal 401(k) plan. The contribution limits are the same as the limits for a traditional 401(k), but because you administer the plan as well, you can match contributions as an employer&emdash;up to 20 percent to 25 percent of salary. That means you can contribute almost double the traditional 401(k) limits in a solo 401(k).

See more:
Solo 401(k) Contribution Limits 2013

Solo 401(k) Contribution Limits 2014

Solo 401(k) Contribution Limits 2015 

Keogh Plans

Keogh plans used to be the only game in town for the self-employed. But in the past decade, they've been left in the dust by SEPs and solo 401(k)s. In fact, the IRS no longer even refers to Keoghs, but the structure that supports them still exists. You can set up a Keogh like a pension or defined benefit plan, where you set an annual goal land fund it. The contribution limits are $210,000 in 2014 and $215,000 in 2015, or 100 percent of compensation, which makes it attractive for professionals who make a lot of money and want to stash a larger portion. You can also set it up like a defined contribution plan that works like a 401(k), with a limit of $52,000 in 2014 and $53,000 in 2015. But the annual paperwork required to maintain a Keogh plan makes it a lot less attractive for most business owners.

What Small Businesses Should Look for in a 401(k)

Before picking a plan, you really should ask a lot of questions and get to know the ins and outs of the plan as well as the associated fees and expenses. It's especially important if you have employees. Here are six questions to ask a 401(k) administrator.

The content on this site is provided for information and discussion purposes only. It is not intended to be professional financial advice and should not be the sole basis for your investment or tax planning decisions. Under no circumstances does this information represent a recommendation to buy or sell securities.