3 Retirement Accounts That May Be Better Than a 401k
The 401(k) is often considered the pinnacle of retirement accounts, but for many savers there's a better option waiting for them to claim it (or perhaps even more than one...). Depending on your particular situation, a SEP-IRA, Roth IRA, or HSA may be a better place to store your retirement savings than a 401(k). Here's how to tell which of these accounts is the best fit for you.
The Simplified Employee Pension account, or SEP-IRA, is the best retirement savings account for most solopreneurs. Even if you don't identify yourself as self-employed, you may still qualify for a SEP-IRA. For example, if you're an employee but have a side gig as well, any income you make from your side gig counts as self-employment earnings for SEP-IRA purposes.
The SEP-IRA is a fabulous choice for two reasons. First, the contribution limits are potentially much higher than the limits of other retirement savings accounts. You can contribute up to $55,000 per year (for 2018), though your contribution is limited to no more than 25% of your self-employment income. And second, because you can make contributions to the SEP-IRA as the employer rather than the employee, these contributions don't count against your standard IRA annual limit. Thus, you can contribute to both a SEP-IRA and a Roth IRA at the maximum allowable level, whereas a traditional IRA and Roth IRA share an annual contribution limit. And SEP-IRAs share the advantages that all IRAs have over 401(k)s, namely, the much longer list of investment options and the ability to choose your IRA provider.
Source: Fool.com
