When you work for an employer, they often offer a retirement plan such as a 401(k) ... which means that choosing a retirement plan often isn't something you even need to think about. When you're self-employed, all that changes. Here's a quick overview of the available options. This video was created by Azlo and Louise Cochrane, CPA and founder of L.F. Cochrane & Associates. Subscribe to our channel for more entrepreneur tips:
Music: “You” by Sappheiros ( used under CC BY 3.0 (
Disclaimer: This video is for informational purposes only and does not constitute professional advisory services. It should not be relied upon for any specific purpose without obtaining personalized professional advice.
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TRANSCRIPTS
So when you're self employed, what you should consider about retirement is that there are several options out there. And so it's best to acquaint yourself with the different options. Um, the best reason to consider retirement is you need to invest in yourself. There's also some great tax incentives or benefits of doing so. So there's the idea that hind pretax and post tax and tax deferral pretax is if you do an IRA contribution and it reduces your taxes for the year by doing that IRA contribution post-tax would be an example of Roth IRA. You're taking money that you've already paid taxes on and putting that into an account. And then tax deferral is you have a business, you're going to calculate a percentage of your net profit from that and you are able to take that as a deduction for the contribution that you're putting into the retirement vehicle.
And then it's only taxable once you withdraw it for your regular needs. I'm required to be withdrawn by 70 and a half, but accessible at 59 and a half. So some of these retirement vehicles I'm going to name, there are solo 401ks. There are 401ks, IRAs, Roth IRAs, simples, SEPs. Some are more popular than others. And so what you need to know about these different types is that they have their own requirements for whether or not they make sense or if you're eligible to actually partake in one of them. Some have to be set up by December 31st before the tax year is over. Others, you have certain requirements. If you have employees, you have to contribute a certain amount for them in order for you to contribute for yourself. Funding requirements are things such as timing of funding, whether you have to fund those before December 31st or you're able to fund those after the year has ended.
There are also, uh, requirements on whether or not you can access those funds earlier than the 59 and a half, 70 and a half requirements such as whether you can take a loan against your balances in those retirement accounts. And then lastly are the limits to contribution. And what that means is, is that you're set by the IRS allowed to contribute X amount to your retirement. And it's based on certain calculations. Your net income, if you have a 401k, you also have a self deferral portion, but you can't go over a certain number. If you're going like gangbusters and you know that your income is just going to go up up in a way, then it definitely makes sense for you to consult a professional pension consultants to figure out if there are additional types of retirement accounts that you could take advantage of to maximize your contribution past what the IRS allows.
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