One of the best ways to save for retirement is to take advantage of a workplace retirement plan, such as a 401k. Typically, contributions can be automatically withdrawn from your paycheck so the money goes into savings before you even have a chance to spend it. Plus, the money comes out of your paycheck pretax, so it lowers your taxable income — which means a lower tax bill. And if your employer matches your contribution, that’s like getting free money.
However, if you don’t have access to a workplace retirement plan, will contribute the maximum 401k limit of $18,000 in 2016 or want a variety of sources of retirement income, there are other valuable ways to save. Here are seven to consider.
1. SEP-IRA or Solo 401k
If you’re self-employed, you can save for retirement with a SEP-IRA or Solo 401k account. “It’s a great way for people who don’t have a 401k at work to create one for themselves,” said Brad Sherman, a financial planner and founder of Sherman Wealth Management.
These accounts can be more valuable than a traditional IRA because the contribution limits are higher, Sherman said. With a SEP-IRA, you can contribute 20 percent of net income, up to a maximum of $53,000. A Solo 401k lets you act as both employee and employer. You can contribute up to $18,000 as an employee plus 20 percent of business earnings, up to a maximum of $53,000. Contributions to both plans are tax-deductible.