If you’re like me and enjoy earning money but not thinking about it – and would prefer it if it took care of itself – the idea of saving for retirement seems painful. And for the self-employed individual, the absence of an employer-based plan can be daunting.

So what do you do? Where do you even begin?  Let me help!

There are many retirement plans out there, and after talking to a financial consultant, I realize that I am no more educated than before!  Great start, right? The good news is that we have choices.


1. Traditional IRA 

Making bank now but think your tax income bracket will be lower in retirement? Contributions are made with pre-tax funds but withdrawals are taxed. If you had a 401(k) from a previous employer, it can be rolled into an IRA. You might also consider a Roth IRA if you feel that your tax rate will be higher in retirement, as withdrawals are tax-free. A tax deduction can be made on your taxes for deposits made to a traditional IRA but not the Roth.




This works well if you are the only employee of your business, since if you make contributions to this account you must contribute an equal percentage of salary for all employees. Distributions in retirement are taxed as income, but contributions are tax deductible on your annual taxes. In 2021, a maximum of $58,000 or up to 25% of the participant’s compensation can be contributed, whichever is less. Annual contributions are not required. To enroll, you must be over 21 years old and have worked 3 of the last 5 years


3. Individual 401(k)

This plan works very well for businesses such as ours – relief veterinarians! – those with no other employees, except perhaps a spouse. There is a limit to the amount that can be contributed, but you may contribute as BOTH the employer AND the employee to your own retirement account in an amount up to 25% of compensation or $58,000 for the 2021 tax year, whichever is less. Those of us who are older can contribute more. There is also a special rule for sole proprietors and single-member LLCs that allow you to contribute 25% of net self-employment income. Contributions are tax deductible and are not required every year. Distributions are taxed.



4. Simple IRA

These accounts are for businesses with up to 100 employees. Employees can contribute a certain amount through salary deferral, but employers are usually required to make matching contributions of up to 3% of employee compensation or fixed contributions of 2% to every eligible employee. Contributions are tax deductible, but disbursements during retirement are taxed. If you are the employer, contributions made to employee accounts are deductible as a business expense. In 2020, the personal contribution limit was $13,500 for those under age 50.


Clear as mud? There is help!

Those are my exact thoughts any time I have to think too hard about any of this. Fortunately, I have great financial advisors in my corner that take care of it for me. 

If you are ready to take a step toward saving for your future, check in with Ted Longo of The Longo Group at [email protected].  Tell him his favorite sister sent you!


The Vanguard Group, 1995-2021, investor.vanguard.com
Self-Employed Retirement Plans: Know Your Options; nerdwallet.com, O’Shea, Arielle

Special thanks to Steve and Ted Longo of The Longo Group.



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