Choosing the Right Retirement Account for 1099 Contractors
Jun 12, 2024
As a 1099 contractor, planning for retirement might seem daunting without the traditional employer-sponsored plans. However, there are several retirement account options available that can help you build a secure financial future. Understanding the features, benefits, and drawbacks of each option is crucial to making the right choice. Here, we’ll explore SEP IRAs, SIMPLE IRAs, and Solo 401(k)s, and provide guidance on how to select the best fit for your needs.
SEP IRA (Simplified Employee Pension)
Pros:
- High Contribution Limits: Allows you to contribute up to 25% of your net earnings from self-employment, with a cap of $66,000 for 2023.
- Ease of Setup: Simple to establish and maintain, with minimal paperwork.
- Tax-Deferred Growth: Contributions are tax-deductible, and investments grow tax-deferred until withdrawal.
Cons:
- Employer-Only Contributions: Only the employer (you) can contribute, which might limit flexibility.
- Contribution Requirements: Must contribute the same...