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10 Steps to Starting an IRA for Small Business Owners and Self-Employed Workers

An Individual Retirement Account (IRA) is a savings account, which is designed to help individuals save for their retirement. IRAs are popular because they allow an individual to save for retirement with tax free growth or with a tax deferral.

There are two different types of IRA – Traditional and Roth IRAs. The main difference between the two is that traditional IRAs can provide a deduction for the holders' contributions and are able to defer taxes on investment income until the funds are withdrawn. With a Roth IRA, cardholders do not receive any deduction for contributions, but their investment income will be distributed penalty and tax free at retirement.

A SEP (Simplified Employee Pension) IRA is a type of traditional IRA for self-employed or small business owners. A small business owner with one or more employees, or anyone with an independent income can open an IRA SEP.

IRAs can be a good retirement for small business owners or self-employed workers as they are easy to set up and individuals do not have to pay tax on dividends or winnings in capital that investments earn.

How to Start an IRA for Self-Employed and Small Businesses

If you are thinking of starting an IRA, take a look at the following 10 steps on how to start an IRA.

1. Decide which IRA would suit you best

Before starting an IRA, it is important to decide whether a traditional IRA or Roth would better meet your individual needs. Factors such as your age, your income, contribution limits, if you can claim your contributions as a deduction on your tax return, and how much money you will need to open an IRA should be considered to decide what type IRA choose.

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2. Think of the opening of an IRA SEP?

Small business owners may want to open an IEP SEP, whereby tax-deductible contributions for the business or individual are put into a traditional IRA, which is held in the name of l & # 39; employee. Only the employer can contribute to an IEP SEP – not the employee.

3. Choose where to open an IRA

You will also need to decide where to open an IRA. When choosing where to open your IRA, it is advisable to look for an account that has little or no account fees, offers full customer support, offers a selection of mutual funds with no transaction fees and offers exchange-traded funds without commission.

4. Decide how much of an initial deposit you can make?

When setting up an IRA fund, decide how much initial funding you can do. Some brokers have a minimum initial deposit of $ 0 for IRAs, but you should know that their mutual funds will require a minimum investment of at least $ 1,000

5 Make Your Investment Choices

It is important for you to know that your IRA fund can be invested in many ways, including bonds, mutual funds or individual stocks. When setting up an IRA, think about your investment choices, and whether you want to go through riskier growth funds or slower but safer market funds.

6 Decide if you have time to manage your IRA?

Small business owners are busy, so you should be wondering if you have time to manage your IRA investment. If this is not the case, having a robo advisor manage the account for you, who uses a computer algorithm to manage your investments according to your goals, can be profitable and fast.

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7. Decide if you are going to open an IRA as a single or married holder?

You can open an IRA either alone or with a spouse. It is important that you know that married holders can double the contributions they can make to the IRA.

8. Consider opening the IRA online

Once you've decided on the type of IRA and the provider you want to go with, one of the simplest and fastest ways for contractors and contractors to run out of time. Open an IRA is online.

Simply go to the vendor's website and provide the information the vendor needs to set up the account. This will include your social security number, your contact information and your job.

9. Decide how you want to finance your IRA

When setting up an IRA, you will also need to decide how you are going to fund the account. If you are transferring funds from a bank account or brokerage account, you will need your account number when setting up your IRA.

10. Configuring Automatic Transfers

For small business owners starting with an IRA, it may be easier to set up automatic transfers in which you will ask your bank to regularly transfer money into your IRA.

In this way, you will make regular savings in your IRA without having to spend time transferring money while it might be better spent to grow your business.

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