In many modern workplaces, employees aren’t aspiring to climb the corporate ladder like they used to. Now, workers are moving in droves toward a less-conventional goal – being their own boss. 

Self-employment probably sounds great for a variety of reasons. 

For many industries, it’s perfectly feasible to run your own business from the comfort of your couch or home office. You can enjoy more flexibility, less rigidity, and a greater sense of ownership and fulfillment in your work. 

However, being your own boss comes with caveats

If you want to make the most of your retirement plan, here are a few things you should know. 

What’s the Difference?

If you run your own company, you’ll handle retirement a bit differently than you would as a traditional employee. 

Rather than opting into your company’s 401K plan, you are in charge of your own allotments. That means that you are essentially your own security blanket. 

If you need quick cash now, an auto title loan might be your best option. But, for long-term savings and security in retirement, you have some choices to consider. 

Fortunately, there are many ways for you to save for that inevitable “rainy day.” 

Roth IRA

An IRA is probably the simplest type of retirement account for self-employed workers

There are no filing requirements, and you can open one even if you don’t have any employees. 

IRA accounts are low risk, but they’re also low reward in comparison to other retirement plans. 

This option is best for new business owners who plan on saving less than $6,000 per year

Solo 401K

If you plan on contributing more than a few thousand dollars each year, you might want to look into opening a solo 401(k).

For this type of account, you would be operating as both an employer and employee (of yourself). 

You have more control over your overall contributions, and you can take advantage of the tax benefits by depositing more than you could with an IRA. 

hat means that you’re free to add more when business is booming, or cut back during lean periods

For those who don’t have employees but want to save more in a shorter amount of time, a solo 401(k) is a great retirement option. 

SEP IRA

If you have employees in addition to yourself and you want to save a considerable amount, the SEP IRA might be for you. 

This type of account is similar to the standard IRA, but you have more flexibility when it comes to employee contributions. 

If you do have employees, your contribution percentages have to be the same company wide. 

In other words, if you set your personal contribution as 15%, you must also contribute that same percentage of each eligible employee’s compensation. 

This plan is best for small businesses or self-employed workers with few or no employees. 

Simple IRA

If you run a larger business with no more than 100 employees, you can contribute up to $19,000 per year with a Simple IRA. 

With this method, you gain tax advantages for employer contributions to employee retirement accounts. 

You also benefit from tax-free deposits until you choose to make a withdrawal, like with other retirement accounts. 

But, unlike the SEP IRA, you are not responsible for the entire employee contribution amount. Employees can also use salary deferral to make their deposits. 

Employees own their SEP IRA accounts, and this option is best for companies with a larger office roster

Defined Benefit Plan

If you are a single, self-employed individual with no employees and high earnings, you might not be interested in the above options. 

A defined benefit plan allows you to put more money away than other retirement options. Your contribution limit is determined by the benefits you expect to receive upon retirement. 

This option acts as a self-managed pension plan, which is ideal for people who want to know exactly how much you’ll receive once you retire. 

These accounts are pricier and more labor-intensive than the previous options on this list, but they’re great for anyone who wants to save a lot of cash – or retire in a short amount of time

Self employment is a path to freedom for most of the workers who pursue that dream. But, that doesn’t mean that you can forgo having a retirement plan

Prepare for your future, as well as the future of your company, by selecting a retirement plan that works for you.

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