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Retirement Saving for the Self-Employed

By Bennett Whitlock, CRPC®, Private Wealth Advisor

If you are self-employed, you need to make retirement saving part of your routine. Even a modest amount can make a big difference in the total amount of your nest egg. Once your income is more consistent, consider increasing your contribution. There are a variety of retirement savings vehicles
for self-employed individuals to consider. Among the most popular savings options are:

SEP-IRAs. A Simplified Employee Pension (SEP) IRA allows you to set aside as much as 25 percent of your net earnings from self-employment, up to $54,000 per year in 2017. A SEP is easy to administer, requires minimal paperwork, and gives you the ability to build a significant pool of savings for retirement.

SIMPLE IRA. This is a fairly simple plan to establish for the self-employed or small business owners. You can contribute 100 percent of your net self-employment earnings up to $12,500 ($15,500 for those age 50 and older). As your own employer, you can also make a modest additional or matching contribution.

Solo 401(k). As a business owner, you’re able to make contributions as both an employer and an employee. As the owner, you can contribute up to 100 percent of your net selfemployment earnings on a pre-tax basis, up to $54,000 in 2017. You can save an additional $18,000 ($24,000 for those age 50 and older) in the plan. For the individual contribution, you have the option of either making pre-tax contributions or saving after-tax dollars into a Roth 401(k) that offers benefits similar to a Roth IRA. A 401(k) has additional administrative requirements that do not apply to some of the other savings options.

Individual Retirement Accounts (IRAs). Another potential option is to maximize annual contributions to IRAs. Those under age 50 can save as much as $5,500 (or 100 percent of income, whichever is less) in an IRA. Those 50 and older can set aside an extra $1,000 above that limit. Contributions may be tax deductible based on your income. Otherwise, you may have the option to save your after-tax dollars into a Roth IRA, if you qualify. When all conditions are met, earnings accumulated in a Roth IRA have the potential to give you a tax-free income steam in retirement.

Selecting which plan or combination of savings plans is right for you is a personal choice. If you have questions, contact a financial professional. Keep in mind that the best approach is the one that encourages you to create a secure financial future for yourself.

Bennett Whitlock, CRPC ®, is a private wealth advisor and managing director with Whitlock Wealth Management, a franchise of Ameriprise Financial Services, Inc. Learn more at or call 703-492-7732.

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