The two basic plans for self-employed individuals would be the SEP IRA and the Individual 401k. A SEP plan has very little to no startup costs and will allow you to put away up to 25% of your compensation or $53,000 for 2015. These calculations can be a little complex, so I would advise you to consult your tax professional or accountant to calculate your contribution. A SEP IRA can be used for self-employed individuals who also have employees. All the contributions made to a SEP plan are tax deductible and will grow tax-deferred.
The other type of plan that can be set up is an Individual 401k plan. The one-participant 401k plan isn’t a new type of 401k plan. It’s a traditional 401k plan covering a business owner with no employees, or that person and his or her spouse. These plans have the same rules and requirements as any other 401k plan.
Elective deferrals can be made to these plans up to 100% of compensation or $18,000 for 2015. If you are over the age of 50 you can contribute up to $24,000 in 2015. Besides your deferral, an additional contribution can be made as an employer non-elective contribution up to $53,000 for 2015. As with the SEP, it is advisable to have your tax professional or accountant help with these calculations. For high wage earners who would like to defer more than $53,000 a year, I would advise you to look into a combination of the 401k along with a defined benefit plan. The contribution calculations for these combo plans can be complex. If you have further questions on how to accomplish this please email or call me and I can guide you in the right direction.