As an independent contractor who makes about $145,000 per year, what are my best options to save for retirement?

I’m an independent contractor and make about $145,000 per year. My wife’s income is much higher and she maximizes contributions to both her 403(b) and 457(b) plans. What are my best options to save for retirement? Should I consider a SEP IRA or a 401(k)?

Personal Finance, Retirement, Retirement Savings, 401(k), Real Estate
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2 weeks ago

Congratulations on saving for retirement.  The best way to save for retirement is to keep more of what you make.  This is done by reducing your current taxes and allowing your money to grow tax deferred.  

In general a Solo 401 (k) plan can provide better tax savings because you can contribute both as an employee and an employer which allows you to contribute more money to the plan.  Additionally, if you are over the age of 50 there are catch up provisions that can allow you to contribute even more.

The SEP- IRA is a little easier to administer and at $145,000 since you can not contribute more than 25% of your income, you will fall under the maximum $55,000 limit for a SEP-IRA.  

Basically either option would work for you at this income level.  The important things to consider would be the ability to earn significantly more so that a solo 401k makes more sense and if not than how whether the slightly easier administration on the SEP-IRA makes sense.  

 

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