Being an independent contractor is difficult. Besides the challenges of running your own business – accounting, marketing, etc, are the stresses to your personal finances. You have to pay for your own health care, pay social security and taxes yourself, (the “Self-Employment tax), and pay for other business insurance.
However, when taking time to prepare a retirement plan, the self-employed actually have an incredible, although not well-known, advantage. By establishing an individual 401k, you can save 3 times as much money for retirement, $56,000 per year ($62,000 if over 50 years old) as many employed individuals at your same income can.
In fact, if you’re married, your business may be able to save you $112,000-124,000 for retirement between the two of you.
You’ll also have the freedom to invest in better funds, at lower expenses, than more company 401Ks (and, in fact, most IRAs).