What tax-free retirement accounts are available for self-employed individuals?
You can open a self-employed 401k, here's an example. You can deposit up to 50K (including the personal cap and the profit sharing/matching portion).
You're misunderstanding the concept of retirement savings. IRA distributions are taxed, in their entirety, as ordinary income. If you withdraw before the retirement age, additional 10% penalty is added. Investment income has preferential treatment - long term capital gains and qualified dividends are taxed at lower rates than ordinary income. However, IRA contributions are tax deductible. I.e.: you don't pay taxes on the amounts contributed to the IRA when you earned the money, only when you withdraw. In the mean time, the money is growing, tax free, based on your investments. Anything inside the IRA is tax free, including dividends, distributions (from funds to your IRA, not from IRA to you), capital gains, etc. This is very powerful, when taking into account the compounding effect of reinvesting your dividends/sale proceeds without taking a chunk out for taxes. Consider you make an investment in a fund that appreciated 100% in half a year. You cash out to reinvest in something less volatile to lock the gains. In a regular account - you pay taxes when you sell, based on your brackets. In the IRA you reinvest all of your sale proceeds. That would be ~25-35% more of the gains to reinvest and continue working for you! However, if you decide to withdraw - you pay ordinary rate taxes on the whole amount. If you would invest in a single fund for 30 years in a regular account - you'd pay 20% capital gains tax (on the appreciation, not the dividends). In the IRA, if you invest in the same fund for the same period - you'll pay your ordinary income rates. However, the benefit of reinvesting dividends tax-free softens the blow somewhat, but that's much harder to quantify. Bottom line: if you want to plan for retirement - plan for retirment. Otherwise - IRA is not an investment vehicle. Also consider Roth IRA/conversions. Roth IRA has the benefit of tax free distributions at retirement. If your current tax bracket is at 20%, for example, contributing $5K to Roth IRA instead of a traditional will cost you $1K of taxes now, but will save you all the taxes during the retirement (for the distributions from the Roth IRA). It may be very much worth your while, especially if you can contribute directly to Roth IRA (there are some income limitations and phaseouts). You can withdraw contributions (but not earnings) from Roth IRA - something you cannot do with a traditional IRA. I'm not a big fan of tax-advantaged retirement accounts. The rules on tax-advantages accounts can change at any time.  It's already painful to get money out before retirement (earnings or possibly contributions taxed as current income, plus 10% penalty).  The rules could get worse. There's also the assumption that your taxes will be lower when you retire.  I think this is a poor assumption. If you get free money from your employer for contribution to a 401(k), contribute up to what will get you all of the free money you can.  Otherwise, pay your taxes and keep control of your assets. So short answer: Keep as much as you can out of tax-advantaged accounts unless you're turning down free money to do so. "The ""hire a pro"" is quite correct, if you are truly making this kind of money. That said, I believe in a certain amount of self-education so you don't follow a pro's advice blindly. First, I wrote an article that discussed Marginal Tax Rates, and it's worth understanding. It simply means that as your income rises past certain thresholds, the tax rate also will change a bit. You are on track to be in the top rate, 33%.  Next, Solo 401(k). You didn't ask about retirement accounts, but the combined situations of making this sum of money and just setting it aside, leads me to suggest this. Since you are both employer and employee, the Solo 401(k) limit is a combined $66,500. Seems like a lot, but if you are really on track to make $500K this year, that's just over 10% saved.   Then, whatever the pro recommends for your status, you'll still have some kind of Social Security obligation, as both employer and employee, so that's another 15% or so for the first $110K.  Last, some of the answers seemed to imply that you'll settle in April. Not quite. You are required to pay your tax through the year and if you wait until April to pay the tax along with your return, you will have a very unpleasant tax bill. (I mean it will have penalties for underpayment through the year.) This is to be avoided.  I offer this because often a pro will have a specialty and not go outside that focus. It's possible to find the guy that knows everything about setting you up as an LLC or Sole Proprietorship, yet doesn't have the 401(k) conversation.  Good luck, please let us know here how the Pro discussion goes for you." "You might consider working on getting your new employer to sponsor a 401k, there may be options where you can invest and they aren't required to add anything as a match (which gives you higher limits). If they don't match, they may just be liable for some administration fees. If you have any side business that you do, you might also be eligible for other ""self-employed"" options that have higher limits (SEP, Simple - I think they may go up to $15k) although, I'm not sure the nitty gritties of them." mhoran answered the headline question, but you asked - Could someone shed some light on and differentiate between a retirement account and alternative savings plans? Retirement accounts can contain nearly anything that one would consider an investment. (yes, there are exception, not the topic for today). So when one says they have an S&P fund or ETF, and some company issued Bonds, etc, these may or may not be held in a retirement account.  In the US, when we say 'retirement account,' it means a bit more than just an account earmarked for that goal. It's an account, 401(k), 403(b), IRA, etc, that has a special tax status. Money can go in pre-tax, and be withdrawn at retirement when you are in a lower tax bracket. The Roth flavor of 401(k) or IRA lets you deposit post-tax money, and 'never' pay tax on it again, if withdrawn under specific conditions.  In 2013, a single earner pays 25% federal tax on taxable earnings over $36K. But a retiree with exactly $46K in gross income (who then has $10K in standard deduction plus exemption) has a tax of $4950, less than 11% average rate on that withdrawal. This is the effect of the deductions, 10% and 15% brackets.  As with your other question, there's a lot to be said about this topic, no one can answer in one post. That said, the second benefit of the retirement account is the mental partitioning. I have retirement money, not to be touched, emergency money used for the broken down car or appliance replacement, and other funds it doesn't feel bad to tap for spending, vacations, etc. Nothing a good spreadsheet can't handle, but a good way to keep things physically separate as well.   (I answered as if you are in US, but the answer works if you rename the retirement accounts, eg, Canada has similar tax structure to the US.) As far as I know, there is no direct equivalent. An IRA is subject to many rules.  Not only are there early withdrawal penalties, but the ability to deduct contributions to an IRA phases out with one's income level.  Qualified withdrawals from an IRA won't have penalties, but they will be taxed as income.  Contributions to a Roth IRA can be made post-tax and the resulting gains will be tax free, but they cannot be withdrawn early. Another tax-deductable investment is a 529 plan.  These can be withdrawn from at any time, but there is a penalty if the money is not used for educational purposes. A 401K or similar employer-sponsored fund is made with pre-tax dollars unless it is designated as a Roth 401K.  These plans also require money to be withdrawn specifically for retirement, with a 10% penalty for early withdrawal.  Qualifying withdrawals from a regular retirement plan are taxed as income, those from a Roth plan are not (as with an IRA). Money can be made harder to get at by investing in all of the types of funds you can invest in using an IRA through the same brokers under a different type of account, but the contribution will be made with post-tax, non-deductable dollars and the gains will be taxed. You can't do what you would like to do, unless your business has another, unrelated investor or is willing to invest an equal amount of funds + .01 into a corporation which will employ you.  You will then need to set up a self-directed IRA. Additionally, you will need a trustee to account for all the disbursements from your IRA. What is the question? Are you just trying to confirm that for self-employed, a Solo 401(k) is flexible, and a great tool to level out your tax rates? Sure. A W2 employee can turn on and off his 401(k) deduction any time, and bump the holding on each check as high as 75% in some cases. So in a tight stretch, I'd save to the match, but later on, top off the maximum for the year. To the points you listed - Your observation is interesting, but a bit long for what you seem to be asking. Keep in mind, there are 2 great features that you don't mention - a Roth Solo 401(k) flavor which offers even more flexibility for variable income, and loan provisions, up to $50,000 available to borrow from the account. My fellow blogger The Financial Buff offered an article Solo 401k Providers and Their Scope of Services that did a great job addressing this. Read this.  https://www.irs.gov/retirement-plans/one-participant-401k-plans  The example makes it very clear. Whether an investment is pre-tax is determined by the type of account (i.e., tax-advantaged vs ordinary taxable account), but whether you can invest in individual stocks is determined by the provider (i.e., the particular bank where you have the account).  These are orthogonal choices.  If you want to invest in individual stocks, you need to look for a bank that offers an IRA/401k/other tax-advantaged account and allows you to invest in individual stocks with it.  For example, this page suggests that Fidelity would let you do that.  Obviously you should look into various providers yourself to find one that offers the mix of features you want. I think it's great idea.  Many large brokerages give customers access to a pretty sizable list of zero commission, zero load funds.  In this list of funds will certainly be an S&P 500 index.  So you can open your account for free, deposit your $1,000 for free and invest it in an S&P index for no cost.  You'll pay a very negligible amount in annual expense fees and you'll owe taxes on your gain if you have to use the money.  I don't follow the school of thought that all investment money should be in retirement account jail. But I think if you have your spending under control, you have your other finances in order and just want to place money somewhere, you're on the right track with this idea. Your approach sounds solid to me.  Alternatively, if (as appears to be the case) then you might want to consider devoting your tax-advantaged accounts to tax-inefficient investments, such as REITs and high-yield bond funds.  That way your investments that generate non-capital-gain (i.e. tax-expensive) income are safe from the IRS until retirement (or forever).  And your investments that generate only capital gains income are safe until you sell them (and then they're tax-cheap anyway). Of course, since there aren't really that many tax-expensive investment vehicles (especially not for a young person), you may still have room in your retirement accounts after allocating all the money you feel comfortable putting into REITs and junk bonds.  In that case, the article I linked above ranks investment types by tax-efficiency so you can figure out the next best thing to put into your IRA, then the next, etc. "If you have already maxed your TSP contributions, the ""401k"" for military folks, you could consider a Traditional IRA contribution. They are tax-deductible, based on some limits, so it may reduce your tax liability. Many online services (Vanguard, Fidelity, etc.) offer quick and free setup of Traditional IRA accounts. If you have already maxed the Traditional IRA as well, you could look at making taxable investments through an online service. Like homer150mw, I would recommend low-cost funds. For reasons why, see this article by John Bogle." I looked a bit at the first 3, .24% expense.  There's a direction to not discuss individual investments here, so the rest of my answer will need to lean generic. I see you have 5 funds. I'm surmising it's an attempt at 'diversifying'. I'll ask you - what do these five, when combined, offer that a straight S&P 500 index (or some flavor of extended market) doesn't?  I've gone through the exercise of looking at portfolios with a dozen funds and found overlap so great that 2 or 3 funds would have been sufficient.  There are S&P funds that are as low as .05%. this difference may not seem like much, but it adds over time.  To your last point, I'd consider a Solo 401(k) as you're self employed. One that offers the Roth option if you are in the marginal 15% bracket. A self-directed IRA could be a good solution for you and all IRAs are qualified IRAs the administrator must allow for alternative assets. However, if you're looking to do the ROBS (Roll Over Business Start-up) system, there are not very many administrators that can facilitate that. There is also a checkbook IRA (aka single member LLC) that more administrators are able to work with, but the rules are different from a ROBS plan. Check with your financial adviser, CPA, tax guru and ask which method would work best for what you're looking to accomplish.