The Independent Contractor’s Survival Guide

Following these tips can boost the finances of the self-employed

certified financial planner and vice president at Law & Associates in Glen Echo, Maryland.

Like a traditional IRA, the money invested in SEP IRAs and one-person 401(k) plans is tax deductible and grows tax free until the money is withdrawn at retirement. Check out Fidelity Investments, which offers SEP IRA and 401(k) plans with no setup fees. For more information and to download forms, go to http://personal.fidelity.com/products/retirement/.

ShareBuilder.com recently launched what it calls The Plan4One, a 401(k) that can be set up online for $75 and a $15 monthly fee to cover administrative costs. For more information, go to www.sharebuilder.com. Investsafe.com offers a Solo-401(k) that costs about $100 a year to administer.

Meeting Insurance Needs
Independent contractors should research and consider buying several types of insurance including health, liability, disability, business interruption, and life. “You’re going to see the accountant, the banker, and the lawyer. The insurance agent is the fourth person you should see,” says James Ralph Jr., president of Southfield, Michigan-based James Ralph Agency Inc. and chairman of the finance and insurance sector for Minority Business Enterprises in Michigan.

Buying an individual health insurance policy can be costly. Policies can range from $250 to $500 a month for an individual, and prices can escalate quickly if you need to insure family members. In addition to researching rates and features of insurance plans online, there are a number of professional organizations that offer group plans at more competitive rates. Sometimes local chambers of commerce, credit unions, credit card companies, alumni associations, and other organizations offer plans. Some states offer low-cost insurance options for families with children.

Disability insurance can protect you if you are unable to work. “A lot of people don’t think it’s important because they don’t think that it’s going to happen to them.” Ralph says. “If you are the only employee and you are an independent contractor — and the business is not operating at that time — disability insurance is designed to replace income that you are losing.” The cost depends on how much income you are trying to replace, Ralph says.

Business interruption insurance will make up for lost income if you aren’t able to work because of theft, fire, natural disasters, and other unforeseen events such as the loss of a key client. Professional liability insurance, on the other hand, can protect you if someone gets hurt or if there’s some type of dispute that leads to a lawsuit. Although forming an L.L.C. will protect personal assets from a lawsuit, it still might not provide you with enough protection, Ralph says. This type of insurance should cost about $1,000 a year.

As an independent contractor, you will probably need to buy life insurance as well. Depending on how much coverage you need, a policy can cost $100 a month.

Some insurance agents offer a special plan for business owners, which can include liability and business interruption insurance as well as a policy that covers the loss of contents from your office and other business-related equipment. These packages can also cover property in transit,

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