Retirement Plans for Self-Employed – 2023

Retirement planning is scary. Universal fact. The sheer number of contingencies to consider is outrageous. Obviously, you can’t plan for everything but starting a business is a huge step in the right direction.

The retirement planning goal should be to understand your particular wants and needs of life and back into numbers that can satisfy them. This answer varies by person and there are entire industries dedicated to help solve these problems.

This post will not solve those questions.

However, it should be known that being self-employed gives you access to retirement options that the W2 worker cannot. Here are two that allow you to supercharge your retirement plans, given you are bringing in enough income.

Solo-401k

A solo 401(k) is a retirement savings plan designed for self-employed individuals and small businesses with no employees other than the business owner and their spouse. It offers many of the same benefits as a traditional 401(k), including tax-deductible contributions, tax-deferred growth, and the ability to roll over funds to an IRA at retirement.

The contribution limit here is the typical $22,500 for 2023 however, you can also contribute from your business 25% of earnings up to $66,000 in total. Solo 401(k)s offer a variety of investment options, including stocks, bonds, mutual funds, and annuities. You can choose to invest your funds in a self-directed solo 401(k), which gives you more control over your investments.

SEP IRA

A SEP IRA, or Simplified Employee Pension Individual Retirement Account, is a retirement savings plan for self-employed individuals and small businesses. It is a type of IRA, but it offers some unique features that make it a good option for self-employed people.

One of the biggest benefits of a SEP IRA is that you can contribute a large amount of money each year. For 2023, the maximum contribution is 25% of your net earnings from self-employment, or $66,000, whichever is less. This is much higher than the contribution limit for a traditional IRA, which is $6,500 in 2023.

Another benefit of a SEP IRA is that contributions are tax-deductible. This means that you can deduct the amount you contribute from your taxable income. This can save you a significant amount of money on your taxes.