Small business owners like the owners of The Tanner Insurance Agency, Inc. don’t have anyone to look out for our retirement but ourselves.
In case you don’t know, two of the best ways for you to sock away money for retirement is by using either a Simplified Employee Pension Plan (SEP) or an Individual 401k account.
Both plans allow some of the highest contribution limits and give you the flexibility of changing how much you set aside each year; important for small business owners.
By far the easiest to administer is the SEP. It works basically just like an Individual Retirement Account (IRA).
The individual 401K isn't complicated either, though it does involve more administrative responsibility on your end and generally has a few modest fees attached. Two important differences:
1. With the SEP you can contribute a higher percentage of earnings , but in the Individual 401K you may be able to contribute a higher dollar amount at identical income levels.
2. You can't borrow from the SEP, like you can from the Individual 401K.
These plans are designed to make sensible retirement savings available to you.