Retirement Plans for Sole Proprietors

Sole proprietors have a lot to worry about. Owning your own business can be fun and freeing, but also complex. You need to constantly be worrying about money. Do you have enough?

Even when you retire, the money problems don’t end there. Now you need to worry about consistent income. Even if you get Social Security benefits, you will want to have some sort of retirement plan in place.

With so much going on as you start a business, you may not even be thinking about retirement. Some people think that once they’re ready to retire, they can sell their business and live off the proceeds. However, this does not always work as planned. In many cases, the business is not worth as much as expected, which can be quite the letdown when you need money quickly.

This means you’ll want to have some sort of retirement plan in place and you’ll want to contribute to it regularly. Making regular contributions helps build capital, which is what you will need to retire.

This may seem daunting, but the good news is that there are options. A financial adviser can help you understand what If you want to do your own research, here are some plans to consider.

Simple IRA

This is a traditional individual retirement account (IRA) for small companies and those who are self-employed. It offers tax-deductible contributions and tax-deferred growth until a person retires and withdraws the money.

SEP

A simplified employee pension (SEP) is a type of IRA available to employers or those who are self-employed people. These plans often have higher contribution limits than regular IRAs and 401(k)s. Self-employed people can contribute up to 25% of their net earnings, or as much as $61,000

Solo or Individual 401(k) 

Under this plan, self-employed people act as the contributing employer and employee. This makes the contribution level higher than a traditional 401(k). This is the best option for those who have registered their business as an LLC. The amount you can contribute can be substantial, as it is based on income. Allowed investments include stocks, bonds, mutual funds, and real estate investment trusts and more. It is best to make withdrawals after age 59 1/2, as they are free from federal income tax.

Traditional IRA

A traditional IRA is probably not the best option for those who are self-employed people but this type of retirement plan is better than nothing. The contributions are tax-deductible up to $7,000 per year.

Learn More About Sole Proprietorship

Having a sole proprietorship can be a good way to make a living, but what happens when you want to quit working? You need to have a retirement plan in place.

Orlando sole proprietorship lawyer B.F. Godfrey from Godfrey Legal can help you understand the ins and outs of owning your own business. We’ll help protect the future of your business so you can retire comfortably. Schedule a consultation today by filling out the online form or calling (407) 890-0023.

Source:

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