Financial issues may at the time seem too overpowering, but having some retirement plan is essential for everyone. There any many investment options that are designed specifically for those working from or running small businesses from home to minimize tax burden and growing a fund for retirement.

SIMPLE IRA

The SIMPLE in SIMPLE IRA stands for ‘Savings Incentive Match Plan for Employees’, while IRA means ‘Individual Retirement Arrangement.’ If you have up to 100 employees, you can invest in a plan through this IRA. As an employee, you can contribute up to$13,500 per year, while as an employer, you can match up to 3%of your net earnings from self-employment.A 25% penalty fee is applied if you withdraw from SIMPLE IRA within two years of opening it, so putting money in it ensures that it will be there for the long run.

Traditional or Roth IRA

Traditional or Roth IRA is considered to be a good start for those looking to invest. Anyone having some form of earnings or income can contribute to this IRA.

However, you can only contribute $6,000 per year or $1,000 more if you’re 50 or older. Roth IRAs have a limit, though, so if you earn too much money per year, you cannot contribute to Roth IRAs.

As for taxes, with Roth IRA, you cannot avoid taxes before, but you can avoid them after you take it out in retirement. For traditional IRA, you avoid paying taxes on the money you put into it before as well.

SEP IRA

Sep stands for ‘Simplified Employee Pension,’ and this kind of IRA is popular amongst small businesses and their owners. Once your business starts doing well, this IRA helps lower your tax accountability.

The money put in isn’t taxed until you withdraw it, and thus, it lets you reduce your income for taxes. As much as 25% of your net earnings can be put into SEP IRA every year. The plus point of having a SEP IRA is that you can fund this IRA after you have paid your taxes, so if you have earned more that year, you can contribute more as well.

Individual or Solo 401(k)

If you are independent, this is a good option for advanced contributions. Individual or Solo 401(k) comes with two options as well, as the employer or as the employee. As the employee, you may contribute as much as 100% of the income you have earned, with the maximum set at $19,500 per year.

If you’re an employee of age 50 or above, the maximum is $25,000 per year. As an employer, it is similar to as much as you contribute to a SIMPLE IRA.

You cannot contribute more than your income as a self-employed worker, but you can give an extra percentage of your net income, with the maximum at $57,000 if you’re under 50 and $63,500 if you’re above 50.

The individual or Solo 401(k) can be used as a Roth version as well, which means you can put in money after paying your taxes, so tax does not apply to the money you withdraw later as well.

Brokerage Account:

A Brokerage Account makes use of a brokerage firm where an investor deposits money with a licensed firm that places trades on behalf of the investor. Even though the firm puts in the work, the revenue belongs to the investor.

The investor can claim any funds brought in by the account but will have to pay taxes on the income. There are no restrictions on investments in a brokerage account, so it is a good choice to put investments in without any limitations or penalties.

A brokerage account can give you access to a wide variety of different investment options such as stocks, bonds and mutual funds. The money may be deposited through a check or transferring money from your savings account.

Once the money has been deposited, the money can be used to buy different types of investment securities. Since your brokerage firm is carrying out the buying and selling, you will be required to pay a certain amount of commission to them.

Investing decisions should not be taken lightly, as even a small mistake can prove to be quite costly in the long run. It is recommended to hire or consult a financial advisor before any such investment decisions are made.

Due to the complexities of most of the rules, opening accounts and avoiding penalties will be made easier with the help of a consultant. Invest wisely so you can have a smooth time working from home and don’t have to worry about the present and the future!

The average amount may be as low as a $1000 to as high as millions depending on the investments, the market you’re trying to reach and the type of business you want to start.

The more competition you face and the more the demand for your services is what sets the tone for the capital required to run your home business.

How to know how much Capital is required for your Home Business:

If you’re beginning, being able to calculate the amount of capital needed will not be an easy task. If you’re new at this, taking some time, in the beginning, to do some research will set you off on the right foot. Only a few businesses can excel without research or prior experience; thus, consulting someone with experience beforehand is advisable before you set off trying to start your home business.

Research:

• Contact people in the same line of work as you intend to be to know what the starting costs and running costs would be of a similar business.
• Use a cost calculator designed specifically for startups to know what initial amount of money you will be requiring.
• Get in touch with retired business people who have worked in the same industry as you and can give you knowledge about it.
• Contact the suppliers you want to pursue to give you insight on retail prices.
• Hire a business or accounting expert to help you before you start your business.

Estimate:

An estimated average amount of money cannot be given clearly for any business idea because each business has its own needs that cannot be generalized. The above options may, however, be able to provide you with a rough idea before you get started so you have an estimate to work with.

Coming up with a forecasting plan will be beneficial as it will help you figure out the costs you will need to meet in your business and the income you will be getting from the profits.

Calculate:

To be able to fully understand how much money you will exactly be required to start your business, you will need to take into account: Capital expenditures, Expenses and Assets.

Capital Expenditure:
It is the first purchase needed to be made to open your business. This is a one-time thing, and you don’t have to pay tax for this usually. These are the essentials needed without which your business won’t be able to operate, such as equipment, machinery, furniture and other such purchases.

Expenses:
These are regular expenses you will need to be making to keep your business running. These are continuous expenses, and tax applies to them, such as salaries, rent, marketing, utility costs and money for advertisement.

Assets:
These are all the monitory resources that already belong to you, such as your savings, equipment or furniture you may already own, or a house from where you want to work.

Where to Get the Money from for a Home Business:

It is no mystery that you will need capital to start your business as stated earlier, but where to acquire the money from is a question all beginners looking to start a home business ask. People usually start home businesses to earn, which means they may not have a lot of money saved already to assist it. However, there are ways to get the capital you need for your home business:

• Personals Savings if you have any
• Money from friends and family if they’re willing to help
• Grants
• A loan from a bank
• Development or Corporate Programs
• Crowdfunding Websites
• Credit Cards

How much Profit you’ll Be Making:

Lastly, when it comes to calculating capital you need to start a home business, you must also know the reasonable amount of profits you will be made to understand how much of it will be paid back to you. You must know how much your target market will be willing to pay to you depending on the product or service you’re selling and whether you will be able to make a sufficient amount of profit from that.

It is advisable to consider those home business ideas that can produce a considerable amount of profit, so your minimum income requirements per month are being met. It also takes some time for most businesses to start earning a profit, so patience is key.

Starting small is a good idea for a most home-based business, but it does not mean that you cannot dream big. For help along the way, consult business experts to make this process easier for you so you can start a home business that will be successful in the future.