When considering a self-employed retirement account, there are several things to watch out for:
- Contribution limits: Each type of self-employed retirement account has its own contribution limits. Make sure you understand the maximum amount you can contribute each year and factor that into your retirement savings strategy.
- Eligibility requirements: Some self-employed retirement accounts have eligibility requirements, such as a minimum income or number of employees. Make sure you meet the requirements before opening an account.
- Fees: Some retirement accounts may have fees associated with them, such as account maintenance fees, transaction fees, or investment fees. Make sure you understand the fee structure and how it may impact your savings.
- Investment options: Some retirement accounts may have limited investment options, while others may offer a wide range of investment choices. Consider the investment options available and make sure they align with your investment goals and risk tolerance.
- Withdrawal penalties: Withdrawing money from a retirement account before age 59 1/2 may result in a penalty, as well as income taxes on the withdrawn amount. Make sure you understand the withdrawal rules and penalties before making any early withdrawals.
- Tax implications: Self-employed retirement accounts offer tax-deferred growth, but you will still owe taxes on the contributions and earnings when you withdraw the money in retirement. Make sure you understand the tax implications of your retirement account and factor that into your retirement planning.
It’s important to carefully consider all of these factors before choosing a self-employed retirement account. A financial advisor can help you understand the options available to you and choose the best retirement plan for your individual needs and goals.