A SEP IRA (Simplified Employee Pension) is a simple retirement plan that functions like a traditional IRA, but allows the self-employed individual to contribute (for 2008) the lesser of: (1) 20% of his or her self-employment income (25% of salary) or (2) $46,000. With a SEP-IRA the annual contributions can vary and the amount of the contributions is deductible as a business expense for the employer

The SIMPLE IRA also functions like a traditional IRA, but it allows the self employed individual with up to 100 employees to contribute up to 100% of their self-employment earnings with a maximum contribution of $10,500, ($13,000 if you are age 50+).

If your net self-employment earnings is less than $42,000, a SIMPLE IRA will allow a higher contribution than a SEP IRA.

If you have employees, the SIMPLE IRA requires an employer contribution. The employer contribution can be either: (1) a dollar-for-dollar matching contribution of up to 3% of the employee's compensation or (2) a non-elective contribution of 2% of the employee's compensation. If the employer chooses to make the non-elective contributions, it must make them for all eligible employees whether they individually contribute or not. The maximum aggregate contribution limit for 2008 is $21,000 ($23,500 if age 50+).

A Solo 401(k) Plan can be established by any “single owner” business with no employees, including a sole proprietorship, partnership (husband and wife), limited liability company, or corporation. A Solo 401(k) plan allows the self-employed individual to make a contribution both in the role of employee and in the role of employer. The contribution limit (for 2008) is up to $46,000 ($51,000 if age 50+). The contribution is made in two parts: (1) a direct contribution by the employee of up to $15,500 for 2008 ($20,500 if age 50+), and (2) an additional contribution by the employer of up to 25% of the employee’s compensation income, or up to 20% of your self-employment income.

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