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Q&A: Retirement Plans for the Self-Employed

Small business owners need to be proactive about retirement savings.

Question: I’m self-employed, and I’ve been lucky over the past 10 years to have created a defined benefit pension plan for myself and funded it. I’m not sure whether there are other retirement savings vehicles I could use to set aside additional tax-deferred dollars. Can you suggest anything?

Ric: You get the applause of the day for doing what so many small business owners fail to do for themselves. They don’t seem to understand that there isn’t a boss offering them a 401(k) plan — so if they don’t create it for themselves, it doesn’t get done. Too often, self-employed people fail to create retirement plans.

It’s great that you have done it, and you’re now asking whether you can do even more. First, talk with the service provider who helped you create and manage your defined benefit plan to see whether you can increase the amount you are contributing to it.

Next, consider establishing a defined contribution plan — such as a solo 401(k) — as a supplement to your pension plan.

You also might consider a nonqualified executive deferred-compensation plan. If you aren’t working with a planner who has the expertise to explore these options with you, call us. We work with self-employed people on such issues all the time and would be happy to assist you.

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