If you want a solid financial plan for retirement, you have to do it as early as possible. Although there is the usual option of stashing money away in a conventional Roth IRA or IRA, there are two basic retirement plans that are perfect for entrepreneurs just like you.
As the employer, you could contribute up to 25% of your compensation to a SEP IRA or Simplified Employee Pension as a tax deduction for your business, and you could grow your investment earnings tax-free.
Setting up a SEP IRA is very easy; you will not need to report anything, and will not have to worry about yearly funding requirements. You could even contribute to a retirement plan you sponsored, if you have employees, while also contributing to your SEP IRA.
If you have employees, however, you must ensure that qualified employees obtain the same contribution compensation percentage.
You also cannot make catch-up contributions if you have employees older than 50 years old and you could receive a higher limit of contribution if you go with the solo 401(k) if your compensation is $212,000 or lower.
Basically, you make contributions that are tax-deferred and up to 25% as an employer, but your overall yearly contributions should not exceed $53,000. Some providers offer an option that would enable you to make use of post-tax dollars rather than pre-tax dollars for financing your plan.
This also enables catch-up contributions, which means that you could contribute more if you are over 50 years old. Your spouse would likewise be able to contribute.
On the other hand, this retirement plan option is only available for entrepreneurs who do not have employees, and once your plan exceeds $250,000, you are required to file a yearly Form 5500 with the Internal Revenue Service or IRS.
You need to allot some time to find out about the best financial plan for your retirement to help make certain that you succeed in your long-term venture – attaining the best possible retirement for yourself, and if applicable, for your employees as well.