What is the best retirement plan for self employed worker?
I am 32 and working as a real estate agent. I don’t have a retirement plan yet, people tell me to open a RothIRA or a simple 401k…i don’t know much about these things, any advice is appreciated.
About.com has some good info on your options. Assuming you qualify, your first step should be to contribute to a ROTH IRA for 2007(you can do this before April 15th, 2008).
Roth IRA, put as much as you can afford to in it.
You can also do more liquid, safer investments, like CD’s and money markets.
For your situation … Go for the Roth until you hit the limit, then put it into a 401k
# If your workplace offers a 401(k) with company match, start there, but don’t count the match as part of your 15%. If something happens (you change jobs, the company quits matching, etc.), you know you’re still putting in what you should. If 4% is matched, put in 4%. Any time your employer gives you free money, take it.
# If your company doesn’t offer a match or a retirement plan at all, start investing in a Roth IRA. If you are married and both spouses are working, you both should take advantage of this powerful wealth-building tool. The best part of the Roth IRA is the interest and distributions on it are tax-free. If you put in $3,000 a year for 30 years in a growth stock mutual funded Roth IRA averaging 12% (the 70-year stock market average), at the end of the 30 years you will have invested $90,000 but it will have grown to $873,000 with no taxes to pay!
# Currently the contribution limit is $4,000. In 2008, you will be able to put up to $5,000 in a Roth IRA. If you are 50 years of age, you can put in an extra $1,000 on top of the limit to “catch up.” Take advantage of this if it’s applicable to your situation.
More info in the link below on the differences.
Let me start by saying, what you need to start first is a ‘Traditional IRA. What is that? You take the money to a Savings institution, and Open an IRA acct.. You can put up to $2000 dollars, in it each year. Preferably all at once on Jan 1 You shop all the banks for the best interest rate, and it is locked up in a time certificate for 18mon or 3yrs..And you do an annual contribution every year thereafter.. Now the good part,, you write off the $2000 off you income tax, which will net you a refund from five to six hundred dollars, every year..Depending what your tax bracket is..The$2000 keeps earning interest and you got 600 of it back..It grows tax free till you take it, in retirement.. Then you can take the $600 refund and invest in stocks ,bonds ,whatever else you wish to try for additional retirement investments. A 401k is really only good if you have an employer who matches a percent of your contributions.. Your self-employed so its all your money.. You can also have a roth I RA which is an investment vehicle which uses the markets ,mutual funds and bond funds for growth. Do yourself a favor and stop in one day at your favorite bank , and sit down with a financial advisor and planner, ask them about retirement vehicles, but just listen.. Then check at several more.. After about three, you’ll have all you need to know to make a intelligent deceision.. Being a real estate agent, you know mortgage loan vehicles are different, and so is retirement investments.. Hope this helps,, I myself practiced this very method ,and retired financially secure.. GOOD INVESTING!! SOLOMON
2 common self employed retirement plans are the SEP IRA and Individual 401k. I’m self employed and setup an Individual 401k. There were 2 websites that helped me understand these 2 retirement options.
1) http://www.sepira.com
This link compares both http://www.sepira.com/sep_ira/sep-or-401k.htm
2) http://www.individual401k.com