Don't Quit Your Day Job
Not everyone is ready to cut ties with a steady paycheck. Many self-employed people are part-timers, perhaps freelancing on the side or running a small business out of their home. There are some huge benefits to keeping your day job, including any health insurance coverage you receive through your employer and your company's 401(k) plan.
This is another big advantage of the SEP IRA. Only the SEP IRA allows you to contribute the maximum amount to both your employer's 401(k) and your self-employment retirement plan [source: Lankford]. You could contribute up to $51,000 on your SEP IRA and up to the maximum allowable on your employer 401(k) (a further $17,500).
But you can't max out two different 401(k) plans. If you have both a solo 401(k) and an employer 401(k), your total contributions to both can't exceed the $17,500 limit. You can, however, still tap the extra 25 percent of net earnings that come through the business.
There is no doubling down on SIMPLE plans, either. The IRS rules for SIMPLE retirement plans state that a self-employed business owner cannot have any other simultaneous retirement plans [source: IRS].
Finance Planning Tips
Here are some tips to help you with generating income and planning for the future.
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