Being self employed it is hard to save for retirement. Is there something similar to a 401(k) that we can set up?
Answers | 2
The truth is that being self-employed actually gives you MORE ways to save for retirement. The method(s) you choose will depend on various factors such as the dollar amount you wish to save each year and whether you have any employees, A self-employed person can open their own personal IRA (traditional or Roth) in addition to any plan they have for their business. As a business owner, a self-employed person can open a SEP (Simplified Employee Pension), a SIMPLE (Savings Investment Match Plan for Employees), or a 401(k). When a self-employed person with no employees (not counting immediate family members) opens a 401(k), we commonly call it a Solo-K. There are even more complicated retirement plans available to a self-employed person (e.g., a Cash Balance Plan) but these are better discussed in detail with an advisor.
A mistake I think many business owners make is to start with a type of plan or account and then figure out how to contribute to it. This is backwards! Start by identifying how much you want to save, what type of tax benefit would be most beneficial, what your risk tolerance and time horizon are, and what other financial goals you may have. Then select the appropriate type of plan or account that best fits your situation.