Are you currently self-employed or thinking about starting your own company? If so, you may be very interested in the following information.
As a self-employed, single-member company, you have the freedom to do essentially whatever you want with your business. If you want to work early instead of late, you can do so. If you want to take on multiple projects at once, no one is stopping you. You don’t have to answer to anyone but yourself and all of the reward is yours to reap at the end of the day!
But there are also downsides to the self-employed lifestyle. For one thing, you are responsible for fixing anything that goes wrong, even if it wasn’t entirely your fault. Furthermore, you have to decide how you will structure your retirement plan.
Fortunately, retirement planning needs can be easily addressed through the Solo 401k retirement plan.
Solo 401k Information
The Solo 401k is a retirement plan reserved for those who work for themselves and have no employees. Generally, this includes contractors, freelancers, and similar professionals.
This plan is unmatched when compared to other self-employed retirement plans for the following reasons:
- The ability to save tons of money each year.Perhaps the most unique part about the Solo 401k is that it considers you to be both an employee and an employer. Because of this, you can make contributions to your plan as if you are two different people. As an employee, you can save a whopping $20,500 each year. But while that amount is fantastic by itself, you’ll be happy to hear that you can save even more in your capacity as employer. Specifically, annual employer contributions can be as high as $40,500. Combined together, you can save $61,000 each year.
- Flexible tax options.With the Solo 401k plan, you can choose between two distinct tax options. Roth contributions are taxed as you contribute them. This means that when you retire, you can make withdrawals without making any further tax payments. Traditional contributions, on the other hand, are taxed in retirement instead of at the time of contribution. Truthfully, both of these options can be beneficial in their own right. Which plan you choose is entirely up to you.
- Loan withdrawal capability.For independent contractors and other single-member business entrepreneurs, tough times can be really tough. For instance, if your industry takes a big hit, you have very few places to turn for financial assistance. For this reason, Solo 401k plans enable you to take out loans of up to $50,000. Naturally, it’s always best to keep your money in your fund until you’re ready to retire. But sometimes you just need a little bit of help to get through a rough patch.
Conclusion
If you run a single-member business, the Solo 401k retirement plan is one of the best ways to overcome the potential issues associated with your venture. The plan offers numerous benefits and can provide you with security and peace of mind that, when you’re ready to do so, you’ll be able to retire comfortably.
