Self-Employed 401(k)s are one of the best ways for self-employed people to save for retirement. Self-Employed 401(k)s function in exactly the same way traditional 401(k)s do, except for a few tweaks.

First of all, Self-Employed 401(k)s can only be opened by a business owner or partnership with no employees, although your spouse may also contribute to the Self-Employed 401(k) if he or she works for the business.

They work exactly like a 401(k), so you can generally contribute to your account as both an employer and as an employee, raising the contribution limit quite a bit, especially if you are also saving for your spouse and either (or both) of you also receive employer contributions from another place of work.

The Self-Employed 401(k) is also offered in a Roth version. There are very simply packaged Individual 401(k)s available from companies such as Vanguard, Fidelity, Oppenheimer, and others. Some of these may not allow you to open an account for partnerships. Because you are the only employee(s), there is no top-heavy testing or auditing required. These tend to be very low-cost.

If you want to get technical about it, these fall into the category of Keogh plans, which is basically defined as a Qualified Plan for self-employed people. You can design your own using Keogh, Profit-Sharing, and 401(k) rules.