Self-Employed? Save More by Setting Up Your Own Retirement Plan

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Profit Sharing Plans - Richmond CPA FirmIf you are self-employed, you may be able to set up a retirement plan that allows you to make much larger contributions than you could make as an employee. For example, the maximum 2014 employee contribution to a 401(k) plan is $17,500 — $23,000 if you are age 50 or older. Look at how the limits for these two options available to the self-employed compare:

1. Profit-sharing plan. The 2014 contribution limit is $52,000 — $57,500 if you are age 50 or older and the plan includes a 401(k) arrangement.

2. Defined benefit plan. This plan sets a future pension benefit and then actuarially calculates the contributions needed to attain that benefit. The maximum future annual benefit toward which 2014 contributions can be made is generally $210,000. Depending on your age, you may be able to contribute more than you could to a profit-sharing plan.

You do not even have to make your 2014 contributions this year. As long as you set up one of these plans by Dec. 31, 2014, you can make deductible 2014 contributions to it until the 2015 due date of your 2014 tax return. Additional rules and limits apply, so contact us to learn which plan would work better for you.

Source: PDI Global

Image: Getty Images

About the Author

Keiter CPAs is a certified public accounting firm serving the audittax, accounting and consulting needs of businesses and their owners located in Richmond and across Virginia. We focus on serving emerging growth businesses and companies in the financial servicesconstructionreal estatemanufacturingretail & distribution industries and nonprofits. We also provide business valuations and forensic accounting servicesfamily office services, and inbound international services.

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