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Reduce your taxes while saving for retirement with one of the five main types of tax-deferred retirement plans for small businesses:
Any of the above
plans is suitable for start-ups or established small businesses such
as: Self-employed
individuals, sole proprietors, independent contractors, 1099 earned
income recipients, independent moonlighters, LLCs, partnerships, or incorporations.
For those who qualify, the retirement plan of choice is the Self-Employed
401k. See short video on Self-Employed 401k (about 4 minutes in length) or read Highlights of the Self-Employed 401k. |
| SUMMARY OF MAJOR SELF-EMPLOYED RETIREMENT PLANS |
| FEATURE |
Solo or Self Employed 401K |
Solo-DB |
SEP-IRA |
| Eligibility |
One person only. (Multiple owners and spouses allowed, but no other employees) |
Business owner and up to 4 employees |
No limit on number of employees.
(most organizations
prefer the
401K ) |
| Key Features |
Low Cost
($0 to $25/yr)
Contributions to plan are discretionary.
IRS form 5500-EZ filing required for balances over $250,000
Roth 401k feature |
Annual Fees
(about $1600/yr +)
Offers the largest tax-
deductible retirement
contribution permitted
by law
Mandatory
contributions for at
least 5 years
|
Very Low cost
(about $15/yr)
Contributions to plan are discretionary.
contributions are
made for one
employee they must
be made by the
employer for all
eligible employees
|
| Loans |
Loans are allowed |
Loans are allowed |
No Loans |
| Contribution Limits * |
See Self Employed Owner Only Calculator or Contribution limits for max contribution limits. |
| Deadline to open plan |
December 31 or End of company’s fiscal year
|
December 31 or End of company’s fiscal year |
Up to time of tax filing |
| Deadline to contribute to plan |
Employer
contributions must be
made by the
employer's tax filing
deadline plus
extensions |
Employer
contributions must be
made by the
employer's tax filing
deadline plus
extensions |
Before the employer's
tax filing deadline
plus extensions |
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Retirement
contributions - for an unincorporated business, income is generally
your net business profit from Schedule C, Schedule C-EZ, Schedule F,
or Schedule K-1 of your Form 1040. For a corporation or subchapter
S, income would be total wages as reported on IRS Form W-2.
* Maximum contribution calculation
assumes that you are not participating in other retirement plans.
Verify your allowable contribution amount and other provisions with your tax advisor before investing. Administration cost for
plans vary widely by vendor and may be more or less (cost figures
are examples only of what it may cost per employee for different
plan types). |
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