Updated on January 10, 2008.

THERE'S MORE to being your own boss than not having to answer to anybody: You can also set up your own tax-advantaged retirement program and probably put aside more each year than you could working for somebody else.

Here are some details on the best self-employed retirement plan options out there based on the 2008 tax rules. (See table below.)

Simplified employee pensions referred to as SEPs or SEP-IRAs are generic retirement plans that allow you to contribute and deduct up to 20% of self-employment income (25% of salary if you're an employee of your own corporation). However, the percentage can be varied each year, so lower amounts (or nothing at all) can be contributed when you turn out to be starved for cash.The maximum dollar contribution is $46,000.

SEPs are great for procrastinators because they can be opened up as late as the extended due date of your income tax return. Finally, SEPs are much simpler to establish and administer than Keogh profit-sharing and pension plans. It literally takes only minutes to get one started usually with no charge with a bank, brokerage firm or insurance company. No annual government reports are required, and ongoing administrative expenses are nil. The bottom line is SEPs are just as easy as deductible IRAs, but they allow much bigger contributions.

Retirement Plan Options*

Plan	Contribution Limits	Phaseout Limits	Comments
SEP	20%*/$46,000	None	Simple to establish and administer
Keogh	20%*/$46,000 (or more)	None	Can be designated a profit-sharing plan, or a defined benefit plan. Generally requires a professional to set up, especially if you want a defined benefit plan.
Solo 401(k)	$46,000/$51,000 if age 50 or older at year end	None	High contribution limits mean you can lower your tax bills and generate more tax-deferred earnings for your retirement stash.
Roth IRAs	$5,000 for singles, $10,000 for couples	$101,000-116,000 for singles, $159,000-169,000 for joint filers	Contributions are nondeductible, but earnings grow tax-free. You can contribute an extra $1,000 if you will be 50 or older as of Dec. 31, 2008.
Spousal Deductible IRA	$5,000	$159,000 to $169,000	If your spouse participates in a retirement plan at work but you do not, the joint AGI limits on a spousal IRA (for you) are $159,000 to $169,000. If you yourself already have another type of smText business retirement plan set up, such as a SEP or a 401(k), then your joint AGI phaseout is $85,000 to $105,000. An extra $1,000 can be added to the account annually if you will be age 50 or older at year end.

Based on 2008 limits.
* 20% of self-employment income or 25% of compensation for employees.

Keogh plans are the self-employed equivalent of corporate retirement programs. They come in two basic flavors: profit-sharing plans and defined benefit pension plans. To get a deduction for the current tax year, the plan must be established before year's end. Once that's done, actual contributions can be deferred until the extended due date for that year's return.

Annual contributions to Keogh profit-sharing plans are based on a percentage of self-employment income or compensation and subject to a $46,000 ceiling. A plan document must be drafted in Year One (this may cost a couple hundred bucks), and the IRS demands an annual report (you can probably do this yourself).

Keogh defined benefit pension plans are designed to deliver a targeted annual retirement benefit, which can be as high as $185,000. Each year's contribution must be calculated by an actuary the exact amount depends on your income, the target benefit, years until retirement and anticipated investment returns. Annual actuarial fees and the required IRS report can run up to a couple grand. Another negative: You're locked into making the actuarially determined contribution each year. However, if you make good bucks and are over 50, a defined benefit plan may be worth all the trouble because it permits much bigger contributions than any other type of program. If you're younger, go with a SEP, profit-sharing Keogh or Solo 401(k).

With a Solo 401(k) you can contribute up to 100% of the first $15,500 of your 2008 compensation or self-employment income ($20,500 if you'll be 50 or older at year-end). On top of that, you can contribute and deduct an additional amount of up to 25% of your compensation income, or 20% of your self-employment income.

You must establish your plan by Dec. 31, 2008, if you want to claim a 2008 tax deduction. For all the details, click here.

OK, you've now decided to set up a SEP, Solo 401(k) or Keogh plan. But in the true American tradition of greed you still want more, more, more retirement tax breaks. Fine. Take a good look at the Roth IRA. Contributions are nondeductible, but earnings build up tax-free and you can eventually take out all your money including earnings without owing Uncle Sam a dime.

For 2008, contributions up to $5,000 are allowed ($10,000 for couples), subject to phaseout between adjusted gross income of $101,000 and $116,000 for singles ($159,000 and $169,000 for joint filers). Fortunately, the phaseouts are high enough to leave most people untouched. The same relatively generous thresholds apply even if you have a SEP, 401(k) or Keogh plan (and even if your spouse is covered by a retirement plan through work of self-employment). So you can contribute the max to your SEP, 401(k) or Keogh and then pop an additional $5,000 (or $10,000) into a Roth IRA to boot. One more thing: You can contribute an additional $1,000 if you will be 50 or older at year end. So can your spouse if he or she passes the age test.

While the deductible IRA is a poor stepchild to other self-employed retirement-plan choices, you should know one thing: If your spouse contributes to a retirement plan at work but you do not, you can contribute $5,000 for 2008 ($6,000 if you will be age 50 or older at year-end) to a spousal deductible IRA, as long as your joint AGI is below $159,000. (The deduction is phased out between AGI of $159,000 and $169,000.) While this is all well and good, contributing to a Roth IRA may save more taxes in the long run.

If your business has employees, a SEP, Solo 401(k) or Keogh generally must cover them as well meaning you'll probably have to make contributions that don't just benefit yourself. All employee SEP contributions are immediately 100% vested. With both Keogh profit-sharing and pension plans as well as 410(k) plans, employees cause lots of complications. The tax guidelines may require you to pay in money on their behalf while limiting contributions for yourself. The existence of employees means you should consult a good employee benefits pro before initiating any type of retirement program (other than contributing to a traditional or Roth IRA for yourself).