Roughly 12.6 million Americans are self-employed, according to recent data from the Pew Research Center, and it seems like that number is growing. If you’re self-employed, you have to provide certain benefits for yourself that most workers assume their employer takes care of, like health insurance, sick time, and retirement savings. Unfortunately, most self-employed small business owners skimp on these essentials for themselves, a situation that will only compound as the current workforce ages. Another Pew study finds that only 1 in 10 self-employed Americans has a workforce retirement plan, which is woefully low. However, you can start your retirement fund quickly and simply by setting up an IRA: a common retirement account. Why Planning for Retirement Is Crucial for the Self-Employed While it might not seem like a big deal at the moment, depending on your age, you’ll need at least some retirement savings as you reach retirement. This is undoubtedly difficult if you are self-employed because a retirement fund isn’t a given when you open for business. “In the post-recession, gig economy era, individuals (millennials especially) increasingly lack access to the kind of long-term financial infrastructure typically provided by employers—a regular paycheck, health benefits, paid time off, retirement contribution matches, and the aid of an HR professional to navigate it all,” consultant Stefanie O’Connell Rodriguez says. Because of the way investments work, time is of the essence: the sooner you set up a retirement fund, the better for your account, even if you start by only saving small amounts. What Is an IRA? An individual retirement account (IRA) is a common retirement investment product that lets you save money over time while getting some tax advantages. The money in an IRA is invested in stocks, bonds, and mutual funds by a bank or investment firm. You can direct how the money is invested, but most people trust a broker to make these investment decisions for them. IRA, Roth IRA, or SEP IRA? Anyone who earns an income can contribute to a traditional IRA. As a self-employed person, you can contribute up to $6,000 annually—or $7,000, if you’re 50 years of age or older. Contributions to a traditional IRA are tax-deductible, but the IRS will collect income tax when you make a withdrawal from your account. Roth IRAs are a very popular option because the tax benefits are typically better than a traditional IRA, although you may not qualify to set up a Roth IRA if your income is very high. Basically, with a Roth IRA, your money compounds tax-free because you fund it with after-tax dollars from your income. As long as you wait until retirement age to withdraw, you pay no taxes or penalties on any of the money in your account. A simplified employee pension (SEP) IRA was devised as a way to allow small employers to set up retirement accounts for their employees. As a self-employed person, you can set one up for yourself. A SEP IRA is similar to a traditional IRA in that contributions are tax-deductible and you pay income tax on the eventual withdrawals. However, the annual contribution limits for a SEP IRA are much, much higher than a traditional IRA, which is why some people go for this option. Where to Open an IRA There is a seemingly endless number of banks and brokers that will help you to set up an IRA. You might start by going to your physical bank and talking to an advisor. You can also find many options online, where you can easily compare fees and options. You’ll have to decide if you want to be a hands-on or hands-off investor. If you want to direct how your money is invested, brokers exist to set you on your way. Often, brokers will help you to guide the investments but make most of the decisions, if that appeals to you. There are also brokers and robo-advisors that will make all the decisions for you, which can be very desirable considering you’re running a small business. What Should Your Initial Deposit Be? Some brokers and banks require an account minimum, but many others do not. Since you’re investing for the long term, you should consider carefully what you can contribute on a regular basis. This might be a few hundred dollars a month or just whatever you can spare after your bills are paid—even if the amount is small, it will grow over the years. If you can get close to the annual maximum contribution of $6,000 or $7,000, though, you’ll earn the most bang for your buck. This is especially true if you start your account when you’re young. Do some research and discuss with your broker what your retirement goals are—this will help you to understand how you can best manage your IRA over the coming years.