Contributed by William Bevins, CTFA at Cypress Capital (Franklin, TN)
Being self-employed brings freedom to build your own business or career path. For many, working for others just isn’t an option. Of course, the downside of being the boss is the inherent responsibility to oversee every aspect of your operation seven days a week.
With the long hours and endless responsibilities, it’s easy to overlook planning for retirement. These days many individuals work for themselves. Realtors, contractors, attorneys, physicians, and many more occupations are members of the self-employed club.
Start With a Written Retirement Strategy
I find many business owners put off retirement planning because they just aren’t aware of the tools that are available to them. Before I talk about a specific plan, I would like to mention that one should always begin with a written retirement strategy. I generally start by modeling a client’s current income and expenses. Finding a realistic amount to contribute initially will help the client stay committed to their savings plan. Re-visiting the plan annually allows us to review the progress and decide if the contributions need to be adjusted for the following year.
An experienced planner will also be helpful when the time comes to convert from financial planning to retirement planning. This is the point when assets are needed to produce retirement income for the client. Visit www.BillBevins.com for more information regarding how I serve my clients.
Three Options for Self-Employed Individuals
Plan options for self-employed individuals without employees include, but are not limited to:
- Individual 401(k) – In 2020, individuals under the age of 50 are allowed to contribute the lessor of 25% of their compensation or $19,500.
- SEP-IRA – In 2020, individuals under the age of 50 are allowed to contribute the lessor of 25% of their compensation or $57,000.
- Roth-IRA – In 2020, contributions are limited to $6,000 for individuals under age 50. An additional $1,000 is available for those over age 50. Roth-IRAs also have income restrictions which begin at $124,000 for single filers and $196,000 for joint filers. For more details please email me.
Roth-IRAs offer an additional advantage as well. A Roth is unique because it allows for emergency withdrawals without penalties on contribution amounts. Some view this feature as a backup emergency fund.
The Bottom Line on Self-Employed Retirement
Being self-employed allows for many effective options to save for retirement. When paired with an experienced advisor, who offers unbiased individualized investment advice, realizing your retirement goals can be easier than one might think.
If you’re not currently working with an advisor, or if you’ve lost contact with your current one, let’s start a conversation. Contact me at [email protected] or by calling (615) 469-7348. For more information and to view some sample portfolio models, visit https://www.billbevins.com. Read my other articles in Williamson Source here.
William Bevins is a Registered Investment Advisor with the SEC. Mr. Bevins began his Advising career in 1995 and has spent 18 years as a Professional Equities Trader. Today his firm, Cypress Capital located in downtown Franklin, TN, manages $260 million from individuals, small and medium size businesses, pensions, and charities. For more information please visit http://www.billbevins.com.
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