At some point in the life of every entrepreneur, they have dreamed of starting their own business. When that newly created entrepreneur shifts away from corporate employment and into the Wild West of self-employment, he takes full responsibility for his financial destiny. Gone are the days of contributing to a corresponding company 401k plan.

These small business owners are now responsible for establishing and contributing to their retirement plan. According to a recent TD Ameritrade survey, 7 out of 10 self-employed do not save regularly (if at all) for retirement. I recently spoke with Heather Banks, a certified financial advisor at First Bank Wealth Management in Asheville, North Carolina. Heather shared with me her impressions of how retirement savings have changed over the years. “For too many years, American citizens have relied on social security benefits to finance their retirement. Social security simply is not able to fully fund a retirement with a realistic expectation of maintaining the lifestyle to which they became accustomed during their years. working years. It is critical that small business owners take advantage of the retirement benefit options available to them and work with financial professionals (financial advisers, accountants, etc.) to determine which option is the most beneficial to them. “

There are several programs that a self-employed person can use to help you achieve your retirement goals.

SEP IRA (simplified pension plan for employees) It is a retirement plan that allows a freelancer or entrepreneur to make donations before taxes. It is a similar plan to a traditional IRA. However, it allows you to have a much higher level of contribution. This type of program is one of the easiest to open and maintain. Most banks and investment firms can help you open and maintain this type of account. With this plan, you can contribute up to 25% of your net income from self-employment. The contribution limit for 2015 is $ 53,000. The deadline to open an account is April 15 following the fiscal year.

ROTH IRA It is a retirement plan where the contributions you make are not deductible in the year the contributions are made, however, they grow tax-free and are not taxed when they are withdrawn. The maximum contribution in 2015 is $ 5,500 if you are under 50 years old and $ 6,500 if you are over 50 years old. These amounts begin to be eliminated for high-income individuals earning $ 116,000 (single / head of household) and $ 183,000 (married). The deadline to open an account is April 15 following the fiscal year.

SIMPLE IRA Plan (Employee Savings Incentive Matching Plan) it is a postponement of the compensation plan. It’s easy to open and maintain with banks and investment firms, but keep in mind that it has a lower contribution limit. This plan is good for businesses where the owners have other sources of income, as it allows them to reserve a higher percentage of profits. You can put all of your net earnings from self-employment in the plan up to $ 12,500 in 2015 through pay cuts. If you are over 50, you can increase your donations by $ 3,000. The employer can also contribute up to 3% of the employee’s contribution. This plan is best for self-employed persons with fewer than 100 employees. The deadline to open an account is October 1.

Tea SOLO 401 (k) Plan it is easy to open and requires little maintenance. It is designed for companies without employees and therefore the program is only available to the owner and his spouse. This plan follows the same rules and requirements as any other 401 (k) plan. You can make salary deferrals of up to $ 18,000 in 2015 plus an additional $ 6,000 if you are over 50. If you hire employees and they meet the plan’s eligibility requirements, you must include them in the plan and your elective deferrals be subject to nondiscrimination testing. The deadline to open the account is December 31st. The program will need to file an annual report with the IRS if it has $ 250,000 or more in assets at the end of the year.

For more information on each of these plans, I recommend that you contact your local Certified Public Accountant and Certified Financial Planner. They can help you choose which plan is best for you. I agree with Dave Ramsey, who said, “I believe that through knowledge and discipline, financial peace is possible for all of us.”