A self employment retirement plan is usually the last thing on a self employed person's mind.
Governments in general actually do help self-employed individuals with no employees other than a spouse to set up a self employed retirement plan by offering generous tax breaks. Using these tax breaks can make you very rich sooner than you think.
These government approved retirement programs permit self-employed individuals to set aside savings up to a specified amount. All contributions and income earned by the account are tax deferred until withdrawals are made during retirement. Investment opportunities include certificates of deposit, mutual funds, and self-directed brokerage accounts.
Tax deferred means that no tax is applied on the contributions to the account and income earned by the account. Income is earned on the full amount contributed and the balance of the account thus grows faster. During retirement, when withdrawals are taxed, your tax rate will normally be lower than it was while you contributed to the account.
But don't expect the government to do the planning for you. You've got to take control and follow your self employed retirement plan with absolute discipline.
Many insurance companies offer an insurance-based self employed retirement plan. This combines retirement provision with life cover for the benefit of your beneficiaries.
A self employed retirement plan doesn't need to be a formal plan. You can transfer a fixed amount every month to an investment account that you set up yourself. This account could be an index fund, a broadly based mutual fund, or a variable annuity. We dedicate a full section to retirement annuities on this Web site.
The key to successful retirement provision for self-employed individuals remains control and discipline.
You can download an article written in 2006 entitled 'The Automatic Millionaire' by David Bach.
The article offer some self employed retirement plan options.
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