Retirement Contributions - Self Employed 

Self-employed individuals have more options when funding their retirement. Regular IRAs and Roth IRAs are available - so, for smaller amounts, see the blog below on that topic. 4 options for larger amounts of contributions include SIMPLE IRAs, SEP  IRAs, Solo-401ks, and Defined Benefit plans.
Target group for each type of plan

• Simple IRA - employers looking to defer up to 12,500 per employee. Employers must match or contribute.
• SEP IRA - Employer looking for flexibility on which employees they are funding, or self employed individual making more than $250,000 per year.  Contributions limited to $53,000
• Solo-401k - Self employed individual making less than $250,000 per year. Contributions limited to $53,000
• Defined Benefit - Employer or self-employed individual looking to contribute more than $53,000 toward retirement in a year - up to $210,000 in 2015.

Fidelity has a chart with more details on each"
https://www.fidelity.com/retirement-ira/small-business/compare-plans

SEP vs. Solo 401k
For most of my self-employed clients, the question is usually around SEP or Solo-401k plans. Why is one better than the other if they have the same limits? You can hit the limits MUCH faster with a solo-401k. With both plans, you are permitted an 'employer' contribution of about 20% of your net business income. I say about, because the calculation is a bit more complex. but with a solo-401k, you can also contribute the employee portion of up to $18,000 or $24,000 depending on whether or not you have reach 50 years of age. For example, if your schedule C income was $100,000 this year, you could contribute about 20,000 to your account with a SEP, or (20,000 + 18,0000) to your account with a solo-401k.

Why would anyone choose a SEP? I see three reasons: 

1. ​If you have full-time employees you will not be eligible for a solo-401k - you will have to provide the 401k to your employees. Note: plans vary regarding part-time employees.
2. If you want to set up a plan AFTER the year is over, you can only do that with a SEP. Note: if your 401k is set up before year end, you can contribute before you file.
3. Some clients had SEP IRAs before Solo-401ks became inexpensive and practical, and don't have high funding requirements. These clients often don't bother switching.

That's in for now - stay tuned next time for retirement distributions!