Importance of Retirement Planning For Self-Employed Individuals

Written by  on December 2, 2014

Many personals prefer self-employment rather than being bossed around by some employer. If you are running a business of your own then you would have the perfect idea of self-employment. There are many uplifts of self-employment as you are the boss of yourself; you decide what to wear and what not. You don’t need to worry that the boss will get angry at you if you reach the office late. There are many benefits of self-employment but with such benefits you also have to face many downfalls of self-employment. Some of the major downfalls of self-employment are listed below:

  • No assurance of steady income:

If you are running your own business then you are not certain that either you will get the next order or not from your client. If you do not get the next order then there will be no income for you in that particular month. This is a major downfall of self-employment that you are not sure either you will make money in the present month or not.

  • Expenditure on health care:

If you are an old fellow in your 40s or 50s then you would have to worry a little about your health as self-employment can cause great tension. You have to take into account the expenses of your health care and this costs a lot if you have no retirement plan. You will have to spend the money which you have saved to invest in your business and that could hurt your business a lot.

  • Education expenses:

If you are married and have a couple of kids then you would have to take care of their every need and get them educated. Although in most countries education is free but still you have to give them college funds and when you do so you will have to bear a huge expense on their education.

Although self-employment is great, but due to such problems you should think over your retirement plan which would be preferable to a single individual such as yourself. Some of the best insurance plans for a self-employed person are:

 

1. Solo 401(k):

This plan resembles to a simple 401(k) plan but this is based for only a single individual who is employed by himself/herself. With this plan you can save a lot of money even if you start at the age of 50. With this plan you can even increase your retirement benefit as you are your own employer. So save your money through this wonderful plan.

 

2.  SEP IRA:

In this plan you can simply set up this account in any bank near you. As the employer has to pay the interest each year in place of his employer in the IRA plan, the same is the case is in this plan although your are the sole employer and you have to pay for your own plan so you don’t have to pay for any individual rather than yourself.

 

3.  Simple IRA:

This plan is the same as SEP IRA but the difference in this plan is that the employee also has to contribute with the employer. As you are the sole employer and employee you have to pay in such a way that you pay such an amount that you can give in double.

 

With the above plans you are sure to successfully set up a plan for your retirement even if you are self-employed. This is the beauty of these plans that you do not have to worry about your life after retirement as you can spend it with great ease and comfort.