There are two sides to consider: what you are allowed to contribute and what you can afford to contribute.
First, if you use the highest contribution account which would be a SEP IRA, that would allow you to contribute the lesser of $57k in 2020 or up to 25% of your net income.
Second, how much can you afford to put away each month/quarter/invoice payment? Do you have enough margin within your consulting rates or product sales to allow you to set aside money for a retirement?
One other aspect to consider is that for every dollar you put into a SEP IRA, you get a tax deduction, so the government will pay you back via your tax bill a certain % (based on your average tax rate). This may all seem complicated, but that’s why we built Namu.
