Another option for independent contractors, although more rarely used, is a personal defined benefit/cash balance plan. This retirement account is best thought of as an extra IRA masquerading as a pension. It has higher expenses than an individual 401(k) due to a requirement for annual actuarial calculations and typically is not invested as aggressively. However, the contribution limits can be quite high, particularly for physicians in their 50s or 60s. It is an option worth exploring for someone interested in saving large amounts for retirement.
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ACEP Now: Vol 37 – No 07 – July 2018Investing in a nonqualified, taxable brokerage or mutual fund account for retirement is also an option. While the tax and asset protection benefits are much more limited, the additional flexibility can be a useful feature. Alternative investments, such as real estate, are also much easier to invest in outside of retirement accounts.
As you can see, an independent contractor has plenty of excellent options to use for retirement savings. While the main pillar should be an individual 401(k), a Roth IRA, HSA, cash balance plan, and taxable account provide additional options.
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