Uber and Lyft drivers. Housecleaners. Photographers and freelance writers. What’s being called the “gig economy” is having an impact on the number of people who are self-employed. In 2013, 6.8 percent of U.S. workers were self-employed, according to the World Bank. The U.S. Bureau of Labor Statistics says that number has risen over the last two years.
Being self-employed can take many legal forms. You might be a sole proprietor, a corporation, or a partnership. No matter what form your small business takes, if you are self-employed, you are eligible to open an Individual 401(k) for retirement savings.
According to the IRS rules, the only people who can be covered by an Individual 401(k) retirement plan are the business owner, his or her spouse, and any partners in the business.
The rules are similar to the traditional 401(k) rules for larger businesses. As a business owner, you can participate in an Individual 401(k) as both:
- An employer can make a profit sharing contribution up to 25 percent of earned income up to the amount allowed by the IRS
- An employee can defer income as a contribution up to the allowed amount
To learn more about self-employed Individual 401(k) and other retirement plans, download The Entrust Group’s report written just for small business owners.