How do you put away for retirement when you are self employed?

Submitted by sjguy1288 t3_z7g3em in personalfinance

Hello everybody,

I'm kind of wondering now since I predict the financial situation of my business to get better; the next question is how does somebody who is a single member LLC put away for retirement?

I'm assuming it's not as simple as opening up before 1K account and paying through it with pre-tax money, I'm not sure but what the other people do that are self-employed?

Everywhere I look nobody really seems to cover this as a valid situation because I believe my situation is very unique.

EDIT: thanks for the input. I'm looking into a SEP IRA and a solo 401k. I suspect that the 401kbi could also borrow from for a loan if I needed to. I don't think the IRA will let me do that.

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Werewolfdad t1_iy6di0v wrote

>the next question is how does somebody who is a single member LLC put away for retirement?

IRA, SEP-IRA, solo 401k. Essentially the same as employed people.

>Everywhere I look nobody really seems to cover this as a valid situation because I believe my situation is very unique.

Doesn't seem unique at all.

https://www.nerdwallet.com/article/investing/retirement-plans-self-employed

https://www.forbes.com/advisor/retirement/best-self-employed-retirement-plans/

https://www.fool.com/retirement/plans/self-employed/

https://www.fidelity.com/learning-center/personal-finance/retirement/self-employed-401k

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rnelsonee t1_iy6dl3a wrote

There's actually a few options, two of which have "Simple"/"Simplified" in the name, so it's really not that bad. The IRS isn't much one for pros and cons so I'd read this NerdWallet page as well. There should be tons of resources, to be honest, as there's millions of self employed persons in the US.

I never had to set one up, but as a single-member LLC, I'd probably look at SEP most closely.

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hopingtothrive t1_iy6g4gy wrote

SER-IRA. The limit to what you can put in varies based on your income.

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Valendorf t1_iy6hifs wrote

I used the nabers group to set up a solo 401k trust. From there I opened a checking account to transfer my contributions to and opened investment accounts as well. With full checkbook control I can invest in pretty much anything that can be considered an investment, from companies to crypto to real estate.

Just be cautious with investing in physical things like gold as there’s been court cases ruling that storing bullion in your attic where you have easy access can’t be considered.

I can also contribute a total of $132,000 (personal contributions + 25% of business income) for both me and the wife since she participates in the business.

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Annabel398 t1_iy6mv6d wrote

Solo 401(k)… works like an employer 401(k) only you can make both the employee and employer contributions. Great retirement vehicle.

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MikeWPhilly t1_iy6v10b wrote

Solo 401k - is an awesome option. But long story short you have more options for retirement than most.

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RHIT_Grad_1964 t1_iy730ob wrote

First are you in the US? Second are you retired from a job and just working as a second career or paid hobby? Basically can you earn money while retired? I’m on disability so I can’t but I can own a company which pays me dividends. So I get a yearly dividend plus a small monthly income which I put on an IRA. If I could earn money it would d nice.

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sjguy1288 OP t1_iy94q34 wrote

Replying to Werewolfdad (#751,300)

Thanks for the help, this is really interesting. I know allot of s Corp people who have retirement, but my income as an LLC didn't seem to dig up much, or I was not looking clearly enough on the Internet.

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sjguy1288 OP t1_iy956qz wrote

Replying to [deleted] (#751,351)

Currently just getting out of the COVID nightmare for work. But I'm expecting to see my income rise due to a drop in expenses. So I'm thinking that now is the time to start retirement planning again.

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