I don’t have a 401(k) plan. What can I do?

Q: I'm self-employed and don't have a 401(k) plan. Are there options for my retirement savings on top of putting $3,000 a year into an IRA?

A: If you're one of America's 10 million self-employed individuals — or one of the many more who make extra money by freelancing — you have the ability to sock away much more than your basic IRA contribution on a tax-deferred basis, but you have to do it in a different account. Here are your options:

Keoghs: These accounts allow you to sock away up to $40,000 a year. If you have employees, a Keogh is a better option than the SEP plan (listed below). Both require you to kick in some percentage of earnings for your employees. But with a SEP your contributions become the employee's immediately, while Keoghs give you the option of having them vest over time.

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Simplified Employee Pension (SEP): SEPs are lighter on the paperwork than Keoghs (opening one took me 15 minutes) and work similarly. Each year, you can contribute up to 20 percent of your business's net income (currently capping at $40,000), and then you can invest the money however you like.

Savings Incentive Match for Employers (SIMPLE): This is the newest option on the list. Companies with anywhere from one to 100 employees are eligible. SIMPLEs work like 401(k)s, but with a forced employer match. (Some employers match, at least in part, on 401(k)s but they are not required to.) Employees can put in up to $8,000 a year pretax; employers must match (dollar for dollar) up to 3 percent of employee compensation or put in voluntarily 2 percent of compensation for each employee. Employees are vested from day one but withdrawal penalties are greater; 25 percent in the first two years, 10 percent thereafter. They cannot borrow from the plan.

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You can take advantage of some of these plans even if you have a 401(k) plan at work. And you can open these accounts at just about any brokerage firm, bank, or mutual fund company. Contributions are tax deductible. You'll be taxed when you withdraw the money, which you may do without penalty after you turn 59½ and must start to do by April of the year you turn 70½. Withdraw early and you'll face a 10 percent penalty and be taxed immediately.

Jean Chatzky’s Bottom Line
This week: A cash cushion for singles
Financial planners across the board agree that the biggest problem single people have with their money is lack of a cash reserve. Unlike those with spouses, of course, they cannot rely on a partner’s income, so it is even more important to have an emergency cushion of money set aside in case they lose a job or become ill and can't work. Here are some guidelines:

The Rainy-Day Account: Typically, you should have an emergency cushion of three months of living expenses. This should include rent, utilities, monthly bills like your credit cards and phones, as well as incidentals — groceries, nightlife and the like.

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A Bigger Cushion: If you're single with either an expensive lifestyle (say, you do a lot of traveling or are an avid shopper) or children to support, your emergency cushion should probably be more in the six-month range.

Stashing the Cash: Put the money in a safe, short-term, liquid account — such as a money market fund — so that it's earning enough to keep you ahead of taxes and inflation but you can get at it when you need it. While you're trying to get your emergency cushion together, it's a good idea to pinpoint other sources of available cash, such as a home equity line of credit, stocks or property you can sell, just in case you get in a jam.

Jean Chatzky is the financial editor for “Today,” editor-at-large at Money magazine and the author of “Talking Money: Everything You Need to Know About Your Finances and Your Future.” Her latest book, "Pay It Down: From Debt to Wealth on $10 a Day," is now in bookstores. Copyright ©2005. For more information, go to her Web site, www.JeanChatzky.com.

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