Retirement savings accounts for freelancers

[Lusitan]

Hi All,

My wife recently switched from working full time to working as a freelancer, in preparation for spending time taking care of our first child who is due in December.

We've been doing the 401(k) / IRA thing for a while now, but I just started looking into other retirement plan options for her since she'll be a freelancer and no longer have a 401(k) plan. In the quick reading about it that I have done so far, it seems like a SIMPLE IRA or a SEP-IRA are the two potential choices I'm looking at, other than her just continuing to contribute to a regular IRA.

Are there any freelancers out there who have used a SIMPLE IRA or a SEP-IRA and have any opinions on how easy they were to setup and maintain? It seems like there is a bit more paperwork required for some of these accounts as compared to the plain old IRA and Roth, but if it's not that bad then it might be worth it.

Thanks.

 

[brewer12345]

I think a solo 401k kicks the other account types butts. You can defer more loot pretty easily. We set one up with Fido for DW and they made it easy.

 

[Gone4Good]

Ditto, what brewer said. Without going back and checking specifics, I think you can contribute as much as $15K more under the individual 401K then with the IRA plans. There is more administrative paperwork with the 401K but it isn't too complicated. The much higher contribution limits more than compensate for the minimal added hassle.

When we set ours up, Vanguard did not offer the individual 401K plan. Fidelity does, but only through their brokerage service (which can be an issue for some people employed by other financial institutions, like me). T. Row Price offers the service as "mutual fund only" which is why we went with them - I'd have gone with FIDO if they didn't make you go through their brokerage.

Here is a link to the T Row site that shows you the max contributions for the individual 401K plans ($44,000 in 2006, but as much as 19K when business profit is only $25K i.e. 76% of business profit).

 

[Lusitan]

Thanks guys, I will look into that solo 401(k) option for her.

Update: Looks like Vanguard still doesn't offer individual 401(k) plans. That sucks.