We’ve got the scoop on the best 3 easy retirement saving options for bloggers or entrepreneurs. Would you rather pay yourself or Uncle Sam? As a self-employed blogger and business owner, I’ve utilized all 3 of these retirement options plus started saving for retirement at age 21 with a Roth IRA. These retirement saving options have enabled me to save big for retirement while also reducing my taxable income. Saving with pre-tax earnings combined with the beauty of compounding interest has helped me save nearly $500,000 in my own individual retirement accounts.
In a nutshell, you get to pay a ton less tax on every dollar you save in an IRA or 401K. So if you are in a 30% tax bracket, that means you keep $0.30 on every dollar. Even better, all that money you save also gets to grow tax free! Yay!
To help you understand how fast your money can grow, in the last 10 years the stock market (S&P 500 – the top 500 companies in the United States) returned just over 14% on average per year. What that means, is that $1,000 invested January 1st, 2010 grew to $3,500 as of December 31st, 2019.
WOW! Do you see the power of compounding, tax free?
Read on to learn more about the best 3 easy retirement saving options for bloggers or entrepreneurs.
How did I save almost $500,000?
When I actually start reviewing my retirement portfolio, I agree it seems astounding to see how the money accumulates over time. If you are only in your late 20’s or early 30’s, the $500,000 number sounds like CRAZY town right? But I’m now 44 so I’ve been contributing for over 20 years. Let’s be clear, I did NOT actually SAVE $500,000, but my account is now worth almost $500,000.
I started small in my early 20’s after graduating from college by putting only $1000 annually in my Roth IRA and then over the years I’ve been able to contribute more as our income grew.
Simply using these 3 retirement tools, I’ve been able to invest and continue to plan for my future retirement even as a self employed entrepreneur.
Best 3 Easy Retirement Saving Options for Bloggers or Entrepreneurs
We’ve got all the details on which retirement options and tools might be best for your own personal situation outlined below. Here’s the various retirement tools I’ve used over the years:
- i401k – Individual Solo 401K plan
- SEP-IRA – Simplified Employee Pension
- Traditional IRA and Roth IRA’s
Obviously, each of these have their own advantages and limitations. Depending on the pros and cons for your own financial situation, you can use what works best for you!
Definitely consider what we think are the best 3 easy retirement saving options for bloggers or entrepreneurs if you are looking for ways to plan for your financial future.
Currently, I use an i401K and then each year contribute the maximum to my Traditional IRA. The amount I am able to put into my i401K has varied greatly over the years as it is totally dependent on the success of my business since I’m a small self-employed business owner. Currently you can contribute $6000 to the Traditional IRA annually. (Note: This number has increased over the years, as the 2019 amount allowed was only $5500. )
So let’s take a deeper look at each option for entrepreneurs! Here’s the inside scoop on the Best 3 Easy Retirement Options for bloggers or Entrepreneurs.
Solo i401k is My Favorite Retirement Tool for Entrepreneurs
I’ve found the most lucrative tax savings option to be my solo i401K. I urge you to open an Solo i401K immediately if you don’t already have one up and running for you via your business. Initially, once I became self employed in my 30’s, I only saved with a Roth or Traditional IRA, then I learned about the SEP IRA so I did both of those options annually. Eventually, I opened my own i401K and this has been the BEST way for me to save more money and pay myself first.
The i401K lets you stash away up to $56,000 per year as of 2020 without paying any tax on this income since you can contribute as both employee and employer. The employer contribution is actually a tax deductible business expense!
You can read all the very specific contribution rules for the i401K on Vanguard’s website. Here’s a few tips and highlights that will show you how it can be a giant tax savings for entrepreneurs.
- Employees may defer 100% of their compensation up to $19,000 for the 2019 tax year
- Combined amount of employer plus employee contributions can’t exceed $56,000 for the 2019 tax year
- You can match your own EMPLOYEE contributions as an EMPLOYER and this can be a business expense. HOORAY! This will further decrease the net income and tax bill to Uncle Sam!
Check out my 5 helpful tips on individual solo 401K contributions here.
If I knew more about my self-employed retirement savings options when I first started my business, I could have saved a lot more tax free income over the years! As a self employed business owner, my income has varied greatly over the years. Being an entrepreneur is unpredictable at best!
I think for those self employed earning lots more money than myself, this option may offer more flexibility. However, at my income range, I’ve found the i401K to better align with my goals. That being said, I did use the SEP-IRA option for several years until I learned about the i401K.
If you’re self-employed, your contributions are generally limited to 20% of your net income.
Learn all about the official SEP IRA rules from Vanguard.
Traditional or Roth IRA
Any individual or entrepreneur can contribute $6000 per year as of 2020 into their IRA. Depending on your combined family income level, you can contribute to either a Roth or Traditional IRA.
You can read about the difference between a Roth and Traditional IRA here.
Pay Yourself First
Remember, the tax advantages of paying yourself FIRST before you pay Uncle Sam at tax time, can actually make saving so much more feasible than you likely realize.
I understand that if you haven’t yet started saving for retirement and are on a tight budget, the thought of saving more can sound absolutely daunting!
My parents instilled in me the need to start saving for retirement literally at age 21 when I started my first job out of college. They sold me on the tax advantages of paying myself first and that later on I’d reap the rewards of compounding interest too.
They urged me to begin annually contributing to my own Roth IRA as soon as I graduated college.Every year since then, I’ve made my own annual IRA contribution. It’s become a habit that’s basically a forced way of investing and saving for retirement.
Besides the Roth IRA contribution, I also maxed out my company 401K during my corporate career in my 20’s. While working in marketing at Ford Motor Company, Wells Fargo and Sanofi Aventis, I always maxed out my possible 401K contribution which gave me a way to instantly save and ultimately pay less taxes by paying myself first!
Does saving for retirement sound daunting to you?
I understand that if you haven’t yet started saving for retirement and are on a tight budget, the thought of stashing cash into a retirement account can sound absolutely daunting!
If you are self employed, it’s super important you understand all the retirement vehicles available that can enable you to save more and minimize your taxable income. We think the above tools are the best 3 easy retirement saving options for bloggers or entrepreneurs.
Have you started saving for retirement?
Do you feel overwhelmed at the thought of planning for retirement?
I promise these are 3 easy retirement options to implement into your business planning and lives. Maybe you are already participating in one or more of these retirement vehicles annually. If not, there is no time like the present to get started saving.