Yesterday we took a brief look at the importance of retirement planning when self-employed. One of the most basic and easy ways to get started is to open an IRA. All that is required to open an IRA is that you have filled out a tax return. You need to be earning money in the U.S. and paying taxes on it.

An IRA comes in two forms: traditional and Roth. With the traditional IRA, the tax advantages are immediate: deductions. You can even count what you put in as pre-tax, lowering the amount that you owe in taxes. The Roth IRA, however, has more long term effects. You count the money as after tax, so that it is already taxed when it goes into the account. This means that your retirement account not only grow tax free, but when it comes to withdrawals, the Roth IRA means no taxes then, either (withdrawals from a traditional IRA are taxed as income). However, the Roth IRA comes with income limitations, and the traditional IRA does not. Both limit how much you can add to your account each year.

If you are self-employed, it is important to start your retirement planning. And one option is the IRA. Also, it is worth noting that a spousal IRA is also available. This is usually for spouses that do not earn money/pay taxes. But it does require that you file a joint tax return.