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The following is a list of basic plans available for a small business or a self employed individual. (updated for  2008):  

• Regular IRA: Allows for deductions of 100% of earned income up to $5,000 or $6,000 if over age 50.
• SEP IRA: Allows for a contribution of 25% of income up to an overall maximum of $46,000. You must contribute for employees. You also could have some restrictions and a “vesting” schedule.
• SIMPLE IRA: This is usually a payroll deduction program where the employee must make a small contribution. The employee could contribute 100% of income up to $10,500 with a $2,500 catchup if over age 50. There may be some administrative costs associated with the SIMPLE but they are very inexpensive to administer and they are less complex and not as costly as a 401k.
• 401K: Allows for a higher contribution by the employee than the SIMPLE ($15,500 or $20,500 if over age 50).  This plan usually has administrative expenses associated with it and is more complex to administer. This type of plan is best for a company with a larger number of employees.
• Sole 401k: A new product for the sole practitioner with no employees. It allows 100% of contribution up to $15,500 plus 25% of compensation. Overall or combined maximum is $46,000.  It is good for a lower wage earner under $180,000-$200,000.
• Defined Benefit Plan: The high earning individual with no employees could sock away over $150,000 per year and reduce his/her taxes significantly by opening a defined benefit plan. You will need an actuary to design and administer the plan and there is a cost to this ($2,000 - $3,000) but well worth it if you could commit to high contributions for a number of years. The ideal candidate is a business owner in his/her mid to late 50’s or older who is making significant income and needs to reduce taxes and save for retirement. 
• Roth Account: The Roth account is not tax deductible. The benefit is that you will never pay taxes on the money when it is withdrawn in retirement if it is held in the account for at least five years and you are over 59 1/2. Roth accounts are now being combined with a 401k and it becomes a Roth 401k. It is like a 401k but the contributions are not tax deductible.  These programs are relatively new and companies have limited experience with them.
• Hybrid Plans: The above is a list of the most common plans used. There are a number of ways to design a retirement plan based on your own personal situation. It is very important to consult with a qualified tax professional or actuary to help you design the program that best fits your needs. We can help you with this!

Tax Savings

Keep in mind that you pay the following in taxes: 12.4% in Social Security Taxes on the first $102,000 of earnings plus 2.9% in medicare tax on all income (see social security self employed)  Beyond that, there are federal income taxes, state income taxes, and sometimes  city taxes. The tax savings alone is an instant return on a pension plan  investment.

Fees 

• IRS Penalty Fees: Usually there are no fees to the IRS to set up these plans, but there may be an IRS filing requirement. On all plans there is a 10% penalty fee to the IRS if you redeem a retirement plan prior to age 59 ½, with the exception of a Roth IRA where contributions could be withdrawn without taxes or penalties.
• Administration fees: Retirement plans could be set up with virtually any kind of institution. Depending on the type of plan, the "institution" may charge a fee to set it up and administer it. Some payroll companies will also charge fees or steer you to a company they work with. These fees can be significant if you have a small plan. There are ways to set up plans with minimal fees.  
• Investment fees:  These are also charged by the specific investment company. If you use a commission based mutual fund or a “loaded” fund like one with an A,B, or C share class, you are paying a commission on that investment. If you use a “no load”  fund there is no commission. Annuities, limited partnerships, etc. may have significant fees associated with them. Do not confuse the sales and redemption fees with the IRS premature withdrawal penalties! 

Rollover Benefits

Virtually all pension plans can be rolled or transferred into an IRA after the person separates from the company or retires (except Roths). It is usually best to do this. The IRA account is designed for an individual and is much easier to deal with at retirement. It is also less restrictive for beneficiaries. The IRA can be received as an "inherited IRA" where in some cases, a pension plan can not. (This law was revised in 2007). Note: Inherited IRA's require that a mandatory distribution be taken each year without regard for the age of the beneficiary.

 Links for Retirement Plans