If you are self-employed, you are going to have to make decisions about funding your retirement accounts. Unlike people who work for companies with 401k programs, or individuals who work in a field where there is a pension program, retirement planning when you are not an employee is a bit different. On the one hand, you don't have matching contributions, like many 401k based employees have, but on the other, you also have more freedom to invest. This is a big decision, and unless you are incredibly well versed in financial markets, it is something that you should seek help with. Here are two important things to consider.
Which Sectors Should They Allocate Funds
Often times employees who work for large companies have a limited number of investment choices. The company that manages the 401k might have a group of different mutual funds for the person to choose from. While they can decide on how much of their salary they allocate to the different funds, they are still limited to the selection of funds that the investing company chooses. As someone who is self employed, you don't have this restriction. You can purchase individual stocks, exchange traded funds, gold bullion, bonds, or even foreign currency. This is both a benefit and a potential hazard. If you are reckless in your investing, you might choose too risky a stock (penny stocks, for instance) and wipe out your nest egg.
This is why it is very important to speak with an advisor, such as at Retirement Funding Solutions - Reverse Mortgages, about which sectors to allocate your funds. You should speak to them about what sort of mix you want. Some people who are years away from retirement will be happier with a more aggressive portfolio that is stock heavy, while those nearing retirement might want a more conservative portfolio that is more weighted towards bonds.
In all cases, an advisor can weed out high fee funds that charge exorbitant fees, as well as steer you away from speculative penny stocks which are too much of a gamble for retirement accounts.
Is A Sep-IRA Something To Consider
A person who works for a company that has a 401k or is in a union with a pension plan can also have an IRA. This is capped at $5500 dollars a year(unless you are 65 or older). For self-employed persons, this might not be enough to save for retirement. Self-employed persons won't have the 401k or pension account, so they need to create as much retirement savings as possible. A great way to do this is to set up a SEP-IRA. These are designed for self-employed persons. It doesn't matter if you run a restaurant, or are a freelance house painter, you can speak with your advisor and decide if you should set up an SEP-IRA. You can still get a traditional IRA (or ROTH IRA) but a SEP-IRA has a higher contribution limit (up to a quarter of your income). So, if you do have extra money, you an tax shelter even more of it for your retirement.