Consider a SEP-IRA

• One savings vehicle for self-employed indiviudals to consider is the SEP-IRA. The SEP-IRA works much the same way as the traditional IRA designed for working individuals, but there are some important distinctions to be aware of. One of the biggest differences, of course, is that only self-employed individuals may contribute to such a plan. This includes consultants, freelancers and others who receive a 1099 for the work they do. One of the chief advantages of the SEP-IRA is its high contribution limits. For those with incorporated businesses the tax-deferred contribution limit is a generous $49,000, while sole proprietors can contribute up to 20 percent of incomes up to $245,000.
  
  

The Solo 401(k)

• The solo 401(k) plan is another attractive option for small business owners and self-employed individuals. The solo 401(k) combines the benefits of the traditional retirement plan with a profit sharing plan that can be used to put aside even more money for retirement and shelter income from the tax man. Unlike the 401(k) plans offered by large companies, the solo 401(k) can be used by small business owners who have no other employees, with an exception made if the only employee is the business owner's spouse.
  
  The basic contribution limits for a solo 401(k) are the same as for a traditional 401(k) plan, but business owners can also, in addition, contribute up to 25 percent of the income generated by the business to a profit sharing plan, pretax. That allows business owners and self-employed individuals to put away significant sums of money and save considerable money when tax time rolls around.
  
  

The Roth Option

• While traditional retirement plans give self-employed individuals the ability to save money on taxes, the Roth option provides a different slant on taxes. In exchange for foregoing upfront tax deductibility, the Roth option allows individual 401(k) contributions to be taken out tax free in retirement. This option can be a good choice for those who expect to accumulate a significant nest egg, because the income generated from those investments could place the retiree in a higher tax bracket.