Individual retirement accounts are open to anyone who has a working income of less than $275,000 per year. This includes salaried work, freelancing, consulting, and other forms of labor but not investment income.
There are two kinds of standard IRA. A traditional account using pretax income up to an annual limit of $5,500. And a Roth IRA using taxed dollars.
For a traditional account, you're required to pay taxes on the proceeds once you retire. A Roth IRA allows you to contribute income that is already taxed. Once you retire, you can withdraw the proceeds tax-free.
Both Roth and traditional IRAs allow you to save money in a tax-advantaged manner. For a traditional IRA, this means you can contribute pre-tax dollars. This allows you to start with a larger principle and benefit from the growth. This kind of account is best if you believe you will have a lower income tax rate during retirement.
A Roth IRA lets you contribute taxed money that can then grow without the need to pay additional taxes. If you believe your income will rise throughout your life this can be a great way to benefit from the lower tax rates of your youth.
Setting up an IRA is probably the fastest and easiest way for a self-employed person to save for retirement. It requires no special forms or other filings with the IRS.
IRAs are only available up to a point. If your income exceeds $275,000 you are ineligible for IRA contributions. The relatively low ceiling on standard contributions, $5,500, is also a downside if you have high earnings.