The Main Contractor Retirement Plan Options For An Independent Worker

By John Thomas


If you are an independent business person, do not think that you are excluded from retiral benefits. Like any worker, you are entitled to many tax-advantaged benefits. Self-employed business people have a variety of choices to make, depending on their income. Thus, you will not be limited to set up the 401(k) account. As an independent business person, you may not benefit from the health and disability insurance benefits that employers give to their workers. However, the options that will be available to you will be suitable as well. The following are some of the Contractor Retirement Plan choices for freelance workers you should consider.

These workers can decide to take the simplified employee option. This is a free benefit that is easy to set up. Most investment companies and banks can help workers to set up the plan. Thus, contractors have a chance to open their SEP account whenever they want. They can do this provided they meet their federal income tax conditions.

A solo 401(k) plan is the second choice. All independent workers may decide to set up this account if they want to. This option is suitable for you if you would like to contribute over 50,000 US dollars every year towards your retirement. To know the requirements you should meet to set up the account, you are advised to contact the IRS. This organization will help you to understand all the requirements for this benefit.

Independent contractors can also take defined-benefit retiral plans. These are the most complicated options. They are too expensive to establish and administer. These benefits are among the least flexible. They have minimum contributions that need a financial planner to calculate the payments for workers. The good side of this benefit is that the payout is guaranteed. Thus, account owners can start receiving their payments when they retire. Also, people have a chance to make significant contributions.

People that have independent businesses can also set up a simple IRA account. Since people do not make similar earnings, they may not select the same accounts. Thus, the simple IRA plan is for workers that cannot set up the defined-benefit and 401(k) accounts. This account allows people to save at least 25 percent of their income. Hence, you can also consider setting up this account.

Other good choices for freelancers include Roth and traditional IRAs. Businesspeople can also select these options if they want to. These benefits are not specific for freelancers. Hence, all workers can decide to open the accounts. Thus, if you are still thinking about what option to chose, you should consider these two benefits.

Roth IRAs, in particular, have significant advantages to independent workers. This option allows people to withdraw the contributions they have before they start making investment returns. The withdrawals are usually tax-free and penalty free. Nevertheless, the rules are complex. Also, people are treated depending on how long they have owned the account and whether they meet all requirements.

Whichever the benefit you intend to sign up for, it is essential to start making early savings. The earlier you start investing, the more secure your retirement will be. Hence, even if you make little income, ensure that you choose the best retiral benefit to invest in.




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