It’s rather difficult to plan for 2010 because I really have no idea how my finances will be. If I get a job in the States, then of course I will max out my Roth IRA and try to come as close to maxing out my 401K as I can’t. But if I work in China, then I’ll need a Plan B.
I am aiming for $500 in freelance income (earned from U.S. sources) a month. I still need to research the finer points of our tax system, but if I can I will put all my freelance income into Roth IRA (or start a self-employed retirement fund, such as the Sep IRA, Simple Plan, or solo 401K).
According to an article by Cash Money Life, a self-employed person can contribute the first $15,500 (2008 limit) to a single-participant 401K plan. 401K plans also come in the Roth flavor. The solo 401K seems like the most appealing plan to me – I will have to see if my current retirement firm offers this option.
At the very least, I should be able to put $5,000 away in retirement funds for 2010.
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Actually, with a solo 401k, you can contribute $16,500 (for 2009) as employee contributions plus another 25% of your income as employer contributions up to a total of $49,000. That said, for the amounts that you're estimated, the paperwork associated with a solo 401k isn't worth.
I would recommend a SEP-IRA. There is no paperwork required and you can contribute up to 25% of your net income. In addition, if you establish yourself as a business, you can write off any related expenses you incur.
The problem with the SEP-IRA is the 25% of net income – if I only make $6K in freelance income, I'd want to put 100% of that into a tax-advantaged retirement fund. I've checked with my investment firm and the costs for a solo 401K is very reasonable.
Hmmm, I never heard of a solo 401k before… interesting!
Good luck with the job hunting! Hopefully it'll rebound soon. I'll keep my fingers cross for you!