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One of the issues plaguing many self-employed folks is how to take advantage of retirement investing without an employer’s plan to make use of. The good news is that there are options for the self-employed to invest in their future. An IRA or a Roth IRA is an option, but there is also a type of retirement investment account for the self-employed called a SEP-IRA.

SEP-IRA

A SEP-IRA is a “Simplified Employee Pension”. Only employers can contribute to a SEP-IRA, and they do it on behalf of their employees. If you are a sole proprietorship, or a very small business (I am an LLC), you can use the SEP-IRA to ideally make contributions on your own behalf. This can be helpful, since it can result in larger contributions than if you have a traditional or Roth IRA. With the SEP-IRA, your contribution limit is the lesser of $49,000 or 25% of the employee’s compensation. (If you are doing it for yourself as a self-employed business owner, your compensation is your earned income.)

When you make a contribution to a SEP-IRA, it is not included in employee income at the time of the contribution, and it is deducted from the employer’s income. Which can be helpful if you are a self-employed business owner. Note that SEP-IRAs follow the same withdrawal rules as a traditional IRA — a SEP plan will not work as a Roth IRA.

My Dollar Plan offer this helpful insight into the pros and cons of the SEP-IRA:

SEP-IRA Pros

Sole proprietors or employers with just a few employees love SEP-IRAs because they are easy to establish and require little effort from year to year. The ability to choose whether or not to make contributions is also ideal for business owners with highly variable income from year to year. Finally, the late contribution deadline makes it easy to use a SEP-IRA to lower your tax bill after you calculate it.

SEP-IRA Cons

Because a SEP-IRA requires contributions to all employees, it is not a good plan for someone with employees who only wants to beef up his or her own retirement savings. It is also not good for businesses with employees that want to be able to contribute to their own accounts. Finally, the SEP-IRA may not maximize savings opportunities for business owners because of the way self-employment income is treated.

It is important that you invest in your future with a retirement account, even if you are self-employed. This is just one of the options that you can consider.

I have a Roth IRA for my retirement account. An IRA is one great way to find a measure of success in investing. Indeed, any retirement account can provide opportunities for success with investing. To make things easier, you can use E*Trade, which is offering 100 free trades with a new IRA account (no, I haven’t been paid to shill for E*Trade, and I don’t actually use E*Trade). But no matter where you have your IRA account, it is possible to maximize your investments. Stock Trading To Go offers this advice when dealing with your IRA:

Things to do with your IRA:

• Use an IRA calculator, like the one at Morningstar.
• Talk to someone about whether it makes sense to convert from a traditional IRA to a Roth IRA.
• Think about tax-managed funds.
• Consider your asset allocation plan.
• Be contrarian — don’t always follow the “conventional” wisdom.

Things to avoid when it comes to your IRA:

• Forget a spousal IRA for your partner.
• Think a lot of cash on hand is necessary.
• Put investments that are already tax-advantaged in your IRA.
• Let your assets remain in a 401k that doesn’t meet your needs.
• Put off investing in an IRA.
• Assume that you are covered if all you have is 401k

Indeed, the IRA is truly a wonderful investment vehicle. Your best plan should be to include an IRA on top of 401k (especially if a company match is involved). We’re looking into a solo Roth 401k for me, and a spousal IRA for my husband, on top of the 401k he is supposed to get at work. The eventual hope is that we can max out our contributions to everything (that goal is years away).

Create a plan in which your retirement plans actually work together.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.

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There is an old saying about the stock market: “Buy low, sell high.” And for many, now is the time for just that. Indeed, there are plenty of so-called “vulture investors” out there right now, waiting to pounce. Stock Market Funding reports on how things are playing out for these investors:

NY Times reports even before the ink dries on a proposed $700 billion bailout for the financial industry, Wall Street players have begun jockeying to be the first ones to snap up distressed investments on the cheap. As they try to make sense of how a government bailout would play, vulture investors are combing through balance sheets of possible targets that could run into trouble if banks start calling back loans to businesses and the economy worsens. …

They are preparing for a field day for deals, not only in the financial industry, but in the industrial, retail and other sectors where the flagging economy and tight credit will push more companies to the brink.

You don’t have to be a vulture investor to take advantage of the climate, though. Measured, thoughtful investments made now can yield good results down the road. Considering value stocks and companies with good fundamentals that are likely to recover is good bargain-hunting sense.

Others are considering funds that are meant to take advantage of pooled performance. Index funds are rather popular right now, since you can get more for less, and — over time — the market generally gains. But for such a strategy it is necessary to have a long term outlook. We’re talking an outlook of 10 to 20 years in order for such a strategy to work well.

Still others are hedging with commodities and using gold to try and prevent inflation from eating away all of their assets.

Are you employing any strategies to maximize your investments right now?

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.

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economy, investments, vulture investors