3 Ways to start saving for retirement as a solo entrepreneur

As an employee of a company with retirement benefits, saving for your post-workforce life is relatively easy. You enroll in a plan offered by your employer and then you automatically contribute to your retirement fund through your paycheck. Essentially, you don't have to do a thing.

But if you're an independent entrepreneur or a small business owner, putting money aside for retirement isn't as simple. You'll have to come up with your own plan of action to make sure you're set later on in life. Because being self-employed often comes with expenses and unique challenges, many new entrepreneurs fail to start a retirement fund early on.

The self-employed have several options when it comes to saving for retirement.

Here are 3 ways for entrepreneurs to start saving for retirement:

A Solo 401(K). This is a great option for small business owners without any employees. A solo 401(K) offers very similar features and benefits that you would find with an employer-sponsored retirement plan. NerdWallet notes that, although you cannot qualify with full-time employees, you can include your spouse if they earn income through your business.

Traditional or Roth IRA. If you're just beginning your journey of self-employment, traditional or Roth IRAs could be attractive options. The main appeal is that you're able to roll an existing 401(K) into an IRA. This is one of the easiest ways to start contributing to your retirement since there are no special filing requirements and you can qualify while having employees. Take time to do research and decide which type, traditional or Roth, makes the most sense for you and your business before opening an IRA.

SEP IRA. Small business owners with a few employees could benefit from opening a SEP IRA. This option has high contribution limits for those looking to save large amounts for retirement, and is very flexible since you won't be required to contribute to it every year. If you have employees, you will be required to contribute equal percentages of salary to every person. So, if you contribute 5% for yourself, you would need to contribute 5% for any eligible employees as well. However, if you don't have staff members, you can still open a SEP IRA but won't need to contribute anything additionally.

According to Pew Research Center, about 30% of Americans are self-employed. While working for yourself comes with many freedoms, it's important to take the initiative to save for your future.

Another key to planning ahead for your business is to ensure that you have proper representation. The attorneys at Hudspeth Law Firm exclusively practice business law and can provide extensive advice and protection for you and your company. Contact us today to learn more about our legal services.

Categorised in: Starting a Business in Arizona

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