I'm self employed how can I save for retirement?

[TylerHartman]

Hello, I was planing on opening a Roth IRA to save for retirement when I've came across info stating I can only place the money earned from working, I'm self employed working as an ebay seller I do not currently pay income taxes but plan to this year is it possible for me to still open a Roth IRA? Or should open a different kind of investment/retirement acct?

Thanks,Tyler!

[disneysteve]

You need earned income to fund an IRA - traditional, Roth, or SEP. Obviously, if you have earned income you are legally obligated to file and pay taxes. If you haven't been doing so, you need to start ASAP.

So yes, you can fund a Roth. For 2013 you can put in $5,500 or your total earned income, whichever is lower. Since that doesn't amount to much, you can also open a SEP-IRA and I'm not positive but I think you can put up to 20% in there.

[DKdon]

disneysteve is spot on … the only thing I have to add is a Exculsive(k). That would allow you to continue with the advantages of a ROTH. This is all assuming you have no employees or other retirement plans … if you do that changes things.

You can have either a ROTH or traditional IRA and/or exculsivek but I believe your SEP is purely tax deferred.

SEP IRA

• Can establish for 2012 (deadline is business’ tax filing deadline, plus any valid extensions)

• Contributions made in 2013 are deductible for 2012 up to the business’ tax filing deadline, plus any valid extensions.

• Can limit eligibility to those meeting 3 years of prior service.

• There are no employee contributions, all funded by the employer.

• Contributions discretionary

• Can be anywhere 0-25% in a given year

• Must be done in the same % (or same $ amount) for all eligible employees

• Annual maximum is $51,000 (no age 50 catch-up)



Exclusive(k)

• Can establish for 2013 (deadline is 12/31/13)

• Must be owner-only in order to qualify. Can have multiple owners, employ a spouse, or have W-2 employees working less than 1000 hours. Cannot have W-2 employees working greater than 1000 hours.

• Salary deferral contributions (employee contributions) up to $17,500 ($5,500 age 50 catch-up)

• Employer contributions can be anywhere 0-25% in a given year

• Annual maximum is $51,000 (plus $5,500 age 50 catch-up)