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Let's talk money.

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The dilemma of having an employer sponsored plan. Does my employer offer one? When will I be vested? Do I have to contribute in it? Is there any match, and if yes how much? These are questions that are rolling in everyone’s head that has a retirement plan through their employer. But what if you don’t have such an option. And with how things are shifting lately with millennials switching jobs often and looking for different opportunities, having a employer sponsored retirement plan is becoming a real perk and luxury. And let me tell you that having a retirement plan is a must, a necessity and not a luxury.

The good news is that if you don’t have access to any of these plans because you’re not eligible or your employer does not offer one, you can have a few options according to your situation.

As far as you have earned income you are eligible for an IRA. There are 2 types of IRA: Traditional IRA and Roth IRA.

Traditional IRA. Everyone with earned income can contribute up to 6K a year with a catch up contribution of 1K if you are 50 years and older. Contribution can be tax deferred but there are some phase out and exemptions according to your income bracket. A very good option to lower your taxable income. However, you will have to pay taxes in earnings and contributions when you withdraw. Although your contributions through out the year will be after tax you can declare them when you file your taxes. If the you withdraw money before age 59 and half you will have to pay taxes and a 10% penalty might apply. Required minimum distribution RMD at age 70 and half.

Roth IRA. It has similarities with the Traditional IRA, as far as having earned income in order to contribute and yearly limit contributions. After tax contributions but tax free on earning if withdrawn after age 59 and half. There is no RMD at age 70 and half for the Roth.

So, as you can see the difference is that you pay taxes now vs latter. The 6 thousand dollars limit per year with 1 thousand catch up applies to both of the accounts. In case you have and contribute to both of them keep and eye to not over contribute above the limit.

But these are not the only sources. As a self employed and if qualified you can have a solo 401K which is relatively easier to set up and does not follow the 401K rules but carry similar benefits. By being able to contribute as the employer and employee at the same time makes it a really good vehicle to contribute toward your retirement tax deferred.

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