Retirement Planning for the Self-Employed: 5 Options for Lowering Taxes and Maximizing Saving
Choosing the right retirement plan can be confusing and overwhelming. Multiple options are available, which is a good thing, but understanding their attributes and intricacies takes time. Additionally, there are frequent updates and changes made by the IRS, such as the CARES Act in 2020 and SECURE Act in 2019, that change the landscape. The good news is that these plans allow self-employed individuals (including small-business owners) to put away far more money than they can with a traditional corporate 401(k) plan. These plans also can be simple to establish and maintain.
Ultimately, the goal of any qualified plan is to save for retirement in a tax-efficient manner. Plans can facilitate tax-free investment earnings (Roth) or tax-deferred savings and investment growth (traditional pre-tax); in eitherplans, so they impose early withdrawal penalties if funds are withdrawn before age 59.5 and can trigger tax consequences upon withdrawal. Also, many have (RMDs).
