Ira For Self Employed (Even Better Than A 401k!)

if you're a freelancer or solopreneur of any kind then this video is for you so all you real estate agents models digital nomads consultants coaches yoga teachers and anyone who really makes a 1099 income I'm talking to you this video will also apply to you if you have a full-time job that you have a side gig on the side so I'd get on a side a side gig that brings in 1099 income listen if you're self-employed I feel you I used to have a 401 K back when I was working in corporate and it was nice because I got an employer match and you have you know something to help you out to save for retirement but when you're self-employed you're completely on your own but ever since I started working for myself I figured out that there are other ways to save and invest for the future so just because you don't have a 401 K does not mean you're screwed so if you want to learn more about how to use IRAs and take full advantage of all the tax friendly ways to help you save for retirement as a solopreneur or self-employed individual then keep watching hey and before we get started go ahead and hit that subscribe button my channel is all about money and investing for beginners and I know it's gonna help you learn a ton so make sure to hit subscribe and hit the notification bar for new videos every week if you're self-employed there are two types of IRAs you need to have the first type is either a Roth or a traditional IRA everyone whoever you are whether you're self-employed or you work for a company is allowed to have a Roth or a traditional IRA they're both amazing ways to stay for retirement and there's really no reason not to take full advantage of them so the first step for you as a self-employed individual is to open a Roth IRA or a traditional IRA both types give you tax benefit but you get the tax benefits of the Roth on the back end and you get the tax benefit of the traditional on the front end or a more in-depth explanation of the difference between a traditional and a Roth IRA then be sure to check out this video right here once you open either a Roth or traditional IRA the second type of IRA you need to have is the SEP IRA most people who have corporate jobs get a 401k with their employer but for you since you don't have a 401k what you can do instead is to open a SEP IRA which stands for simplified employee pension deaf IRAs allow you to put away up to twenty-five percent of your income or fifty six thousand dollars whichever is lower and that's five percent of your net income so after the expenses that you report so let's say you make a hundred thousand dollars of net income in one year then you can contribute twenty five thousand dollars into your step IRA that year twenty five percent the best part is that you can write off any contributions you make to a SEP IRA so it's a really good way to reduce the taxes you have to pay every year it's like why pay any more taxes than you need to contributing to my SEP IRA saves me thousands of dollars in taxes every year not to mention it helps me save some serious bucks for retirement I've talked to way too many freelancers and solopreneurs who aren't doing anything to prepare for retirement and I know it's a really long way off but there's no corporation that's gonna do it for you so you really need to think about your future and take advantage of any tax loopholes and ways that the government gives you to help you prepare so ideally you have a SEP IRA and you have another IRA either a Roth or traditional and you are maxing out your contributions to both now if you're a full-time employee and you have a 401k but you also make income on the side as a solopreneur then you are a lot to have a SEP IRA as well but tax laws are pretty complicated and there's always exceptions and what not giving your specific situation so the only way to know for sure is to talk to your accountant but in general you are allowed to have both the 401k and the SEP IRA as long as you stay within the total annual contribution limit as of 2019 you're allowed to put up to fifty six thousand dollars per year tax-free into your step IRA and or 401k combined there are other retirement savings options for self-employed people but in my opinion they aren't as good as the SEP IRA the simple IRA is another option but the annual contribution at $12,500 versus the step IRAs fifty-six thousand dollars is a lot lower so the simple IRA is a much less popular option than the set and another option is the solo 401k but those require a lot more paperwork and similar administrative stuff that a SEP IRA doesn't have so in general it's not really worth the hassle to have a solo 401k over a SEP IRA unless you're over 50 years old and that's because the solo 401k lets you do what's called catch-up contributions now I'm not gonna get into the specifics of Scylla 401ks in this video but just know that if you're self-employed and you want to be able to save a ton of tax-free money for retirement and keep your investments in a tax ID account a SEP IRA is a super easy and hassle-free option to open a SEP IRA all you have to do is choose a brokerage that offers the SEP IRA as an account option I currently have my SEP IRAs adela t and I love it but there's a lot of other really great brokerages out there to choose from Vanguard is great for anyone who wants to invest in index funds although fidelity is good for that too betterment is another option you can look into it's a Robo advisor that offers professionally designed investment portfolios that you can choose from and then customized for your goals and your risk tolerance the interface is super nice and easy to use other brokerages that offer stuff IRAs are TD Ameritrade e Trade Charles Schwab and Interactive Brokers if you learn something from this video please give it a thumbs up and feel free to let me know in the comments if you have any questions and I'll be sure to get back to you once you've set up your step IRA and you want some ideas on what to do with it check out these two videos right here for some beginner friendly info on how to start putting your money to work and of course if you're new to the channel be sure to hit that subscribe button for new money and investing videos every week always remember to go after your dreams unapologetically and to live life on