Good news: There are a lot of them. The challenge is figuring out which of the major lone-eagle plans best suits you.
The most common retirement accounts for the self-employed are SEP IRAs, Simple IRAs and Individual 401(k)s (you may also hear about Keogh plans, which have largely been phased out due to a tax law change in 2001). These plans, similar to ones offered by employers, have two factors in common: up-front tax breaks and tax-deferred saving, meaning you don’t pay taxes until you withdraw the money in retirement (the Roth version of the individual 401(k) is slightly different.)
The various tax-sheltered plans vary in terms of when and how much you’ll be taxed, as well as the maximum annual contributions you can make. The right plan for you depends on how much you can save and whether or not you have employees. So if you’re looking to set one up, your first step should be to consider how much you can afford to save without seriously compromising your lifestyle – and how much you’ll need during retirement.
This can all get pretty complicated, especially when combined with owning a small business, so in addition to learning more about the various options, it’s a not a bad idea to discuss the decision with a financial adviser.