Retirement Saving for the Self-Employed ~ YOUR MONEY WITH ALEX TALCOTT

By: Alex Talcott – May, 2017

Alex Talcott, Vaura ConsultingNew England is an especially exciting, entrepreneurial place. Many choose the fulfilling journey of self-employment, taking upon themselves the management of opportunities as well as responsibilities. Small-business owners just starting out are in control of virtually every aspect of their enterprise, which includes making personal retirement happen. If you are self-employed or thinking about making the leap, make sure you prioritize your own future. Before financial independence, you also deserve to enjoy tax advantages in the shorter term. Explore retirement plan options available to you.

Make retirement saving a habit

If you are self-employed, you need to make retirement saving part of your routine. Although it may be challenging to determine what your salary is – and therefore what your retirement savings will be – commit to set aside money each month. Even a modest amount can make a big difference in the total amount of your nest egg. Once your income is more consistent, consider increasing your contribution.

Savings options available

There are a variety of retirement savings vehicles for self-employed individuals to consider. You can use one approach or a variety of vehicles to build your nest egg. Among the most popular savings options are:


A Simplified Employee Pension (SEP) IRA allows you to set aside as much as 25 percent of your net earnings from self-employment, up to $54,000 per year in 2017. It is easy to administer, requires minimal paperwork, and gives you the ability to build a significant pool of savings for retirement.


This is a fairly simple plan to establish for the self-employed or small business owners. You can contribute 100 percent of your net self-employment earnings up to $12,500 ($15,500 for those age 50 and older). As your own employer, you can also make a modest additional or matching contribution.
Solo 401(k). 

As a business owner, you’re able to make contributions as both an employer and an employee. As the owner, you can contribute up to 100 percent of your net self-employment earnings on a pre-tax basis, up to $54,000 in 2017. You can save an additional $18,000 ($24,000 for those age 50 and older) in the plan. For the individual contribution, you have the option of making either pre-tax contributions, or saving after-tax dollars into a Roth 401(k) that offers benefits similar to a Roth IRA. A 401(k) has additional administrative requirements that don’t apply to some of the other savings options.

Individual Retirement Accounts (IRAs). 

Another potential option is to maximize annual contributions to IRAs. Those under age 50 can save as much as $5,500 (or 100 percent of income, whichever is less) in an IRA. Those 50 and older can set aside an extra $1,000 above that limit. Contributions may be tax deductible based on your income. Otherwise, you may have the option to save your after-tax dollars into a Roth IRA, if you qualify. Earnings accumulated in a Roth IRA have the potential to give you a tax-free income steam in retirement, when all conditions are met.

Look for guidance

Choosing which plan or combination of savings plans is right for you is a personal choice. If you have questions or want additional information about your options, contact a financial professional. No matter what options you choose, keep in mind that the best approach is the one that encourages you to create a secure financial future for yourself.

Alex Talcott, JD, is a Financial Advisor with Ameriprise Financial Services, Inc. in Portsmouth and Bedford, New Hampshire and Middleton, Massachusetts. He specializes in fee-based financial planning and asset management strategies and has been in practice for 10 years. To contact him: (603) 319-3108; 25 Chestnut St., Ste. 300N, Portsmouth, NH, 03801;

Investment advisory products and services are made available through Ameriprise Financial Services, Inc., a registered investment adviser. Ameriprise Financial Services, Inc. Member FINRA and SIPC. © 2017 Ameriprise Financial, Inc. All rights reserved. File #1742311 (Approved until 03/2018)