Retirement Planning For Small Business Owners and Freelancers: How Do You Choose Between a SEP IRA and a Solo 401(k)?
If you’re a small business owner, planning for retirement can get a little confusing. How do you know which retirement savings plan will work best for you? Specifically, how do you choose between the Simplified Employee Pension (SEP) IRA and a Solo 401(k)? Each has its own benefits and drawbacks, but after reading this post, you should be able to see which one will work the best for your circumstances. Here’s a walkthrough of how both types of accounts work and their pros and cons. What is a SEP IRA? A SEP IRA is an account that’s similar to a traditional IRA. Account owners can make tax-deductible contributions throughout the year, and the money in the account can grow tax-free. Once you do retire, you’ll be taxed on the qualified withdrawals you make. The SEP IRA is designed to allow small business owners, whether sole proprietors, partnerships, or corporations, to make contributions for themselves and their employees (if they have any). However, if you do have employees and y