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Which retirement option is best for self-employed people?
Old 05-17-2016, 12:44 PM   #1
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Which retirement option is best for self-employed people?

So I've been working for a few years now, on a contracting basis, and have yet to start a retirement account, which is bad. I'm having a lot of analysis paralysis because there are multiple options out there like Roth IRA, Backdoor Roth, Simple IRA, SEP IRA, etc.

I'm looking for some help in terms of which would be best for my situation. I don't have employees and make less than 100k a year.
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Old 05-17-2016, 01:01 PM   #2
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As a sole proprietor with no employees, a SEP IRA allows you to contribute up to 20% of your net profits each year (max $53K per year), possibly with an adjustment for self-employment taxes (it's been a long time since I set mine up). Must set it up prior to the end of the year. To set it up requires you to fill out one form. You decide each year how much you wish to contribute. Contributions are deductible and subject to RMD. However, you can contribute to the SEP IRA past age 70.5 as long as you have self-employment profits.

See IRS Pub 560 for details. https://www.irs.gov/pub/irs-pdf/p560.pdf

You can still contribute to a Roth IRA even with a SEP IRA.
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Old 05-17-2016, 02:09 PM   #3
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How about Solo 401k?
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Old 05-17-2016, 02:56 PM   #4
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53K a year is the 415c limit for 2016 - can't defer more than that
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Old 05-17-2016, 03:37 PM   #5
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I went through this analysis myself recently, and I went with a Solo 401(k) (also known as an Individual 401(k). Several articles I read indicated that it has a number of advantages over a SEP or Simple IRA.
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Old 05-17-2016, 03:37 PM   #6
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SEP-IRA via Vanguard is what you want to do. You should try to contribute 10% if you can. I would advise you aim for higher like 20% of your income. Some on this forum are able to save 50+% but its all relative to your income and expense.

You will need a business checking account opened and tied to your TIN/SSN so that you can make contributions to the SEP-IRA.
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Old 05-17-2016, 04:50 PM   #7
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I was tax free for the first $30k or so into my Individual (Solo) 401k. There are Roth Individual 401k's as well. Back when I was looking into my options that was by far the best for me.
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Old 05-17-2016, 04:58 PM   #8
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I did a SEP for may years. Worked very well for me.
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Old 05-17-2016, 05:35 PM   #9
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Is it possible or advisable to have two retirement vehicles? For example, a SEP IRA and Roth IRA? Or a Roth IRA and an Individual 401(k)?
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