There are increasing numbers of self-employed people in the United States, and the flexibility that self-employment can provide is quite appealing to many individuals.
However, no one has put a benefit plan in place for you when you work for yourself, so you have to take steps to prepare for your retirement rather than simply contributing into a 401(k) plan that is offered by your company.
It takes self-discipline to accumulate the resources that you will need to retire in comfort when you are self-employed because the money is not going to be taken out of your check without your ever seeing it. However, if you do exercise restraint and act conservatively over a number of decades, you should be able to put together an adequate nest egg.
It is possible to create a self-employed 401(k) plan. With this plan you can contribute tax-deferred assets into the account, and the limit for 2013 is $17,500.
There is however a caveat for those who are at least 50. If you have reached this age you can make “catch-up” contributions of up to $5500 that exceed $17,500.
With traditional individual retirement accounts you must pay taxes on the distributions once you start to receive them. You can start to draw funds out of the account when you are as young as 59 1/2 years of age. You must start taking distributions when you are 70 1/2 years of age.
To learn more about retirement planning for self-employed individuals don’t hesitate to contact us to arrange for a free consultation. We can be reached by phone at 606-324-5516 (Ashland), 859-372-6655 (northern Kentucky), or 704-944-3245 (Charlotte).