2024 Overview
Executive Summary
This brief outlines retirement plan options for self-employed individuals, comparing key features, contribution limits, and strategic considerations for optimal selection.
Key Options at a Glance
Solo 401(k)
Maximum Contribution: $69,000 ($76,500 if age 50+)
Best For: High-income self-employed individuals with no employees
Key Advantage: Highest potential contribution limits
Key Consideration: More complex administration
SEP IRA
Maximum Annual Contribution: $69,000
Best For: Self-employed seeking simplicity with high contribution limits
Key Advantage: Easy administration
Key Consideration: Must contribute equally for any employees
SIMPLE IRA
Maximum Annual Contribution: $16,000 ($19,500 if age 50+)
Best For: Businesses with few employees
Key Advantage: Lower administrative burden
Key Consideration: Mandatory employer contributions
Traditional/Roth IRA
Maximum Contribution: $7,000 ($8,000 if age 50+)
Best For: Supplemental retirement savings
Key Advantage: Can be used alongside other plans
Key Consideration: Lower contribution limits
Strategic Selection Matrix
If You Need… | Consider |
Maximum Contributions | Solo 401(k) |
Simple Administration | SEP IRA |
Employee Coverage | SIMPLE IRA |
Tax Flexibility | Roth IRA + Another Plan |
Risk Factors
Administrative Risk
Solo 401(k): High
SEP IRA: Low
SIMPLE IRA: Medium
Traditional/Roth IRA: Low
Compliance Risk
Solo 401(k): High (Form 5500 required over $250,000)
Others: Low
Implementation Timeline
1. Solo 401(k): Establish by December 31st of tax year
2. SEP IRA: Can set up until tax filing deadline
3. SIMPLE IRA: Set up by October 1st for existing businesses
4. Traditional/Roth IRA: Contribute until tax filing deadline
Recommendations
High-Income Solo Operators:
Primary: Solo 401(k)
Secondary: SEP IRA
Growing Businesses:
Primary: SIMPLE IRA
Secondary: SEP IRA
Variable Income:
Primary: SEP IRA
Secondary: Traditional IRA
Tax Diversification:
Primary: Solo 401(k) with Roth option
Secondary: Roth IRA
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