How Solo 401k May Be Best for Your Business

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If you run a single member business, you’ve probably given a lot of thought to how you can best increase your profitability. In fact, you may have even experimented with some different investment strategies, pricing options, and all sorts of other considerations to see what will work best for you.

But perhaps you haven’t given much thought to your retirement planning needs. You may be so overwhelmed with your day to day operations that retiring is the last thing you could ever even think about right now.

Unfortunately, the reality is that time moves very quickly. Before you know it, you’re going to be in your sixties and thinking about retiring. When this happens, you don’t want to have a feeling of impending doom because you never started saving for retirement.

The easiest and best solution for this problem, as it relates to single member businesses, is the Solo 401k.

How Does a Solo 401k Work?

For those who have no employees within their company, a Solo 401k retirement plan is an incredible option. It offers numerous benefits to single member businesses and is one of the best retirement planning options available to anyone.

While we could list the many benefits of this plan, we’ll stick to three of the main perks related to a Solo 401k:

  • You Can Save a Lot of Money. Get ready for this: with a Solo 401k, you can save a total of $61,000 each year. How is this possible? Well, with this retirement plan, you are considered both an employee and an employer. As a result of this unique status, you can make investments as two different people. in your role as employee, you can contribute $20,500 each year. Conversely, as an employer, you can invest $40,500 each year. All in in all, you save $61,000 annually. This makes the Solo 401k one of the most compelling plans available on the market.
  • You Have Multiple Tax Options. When it comes to taxes, you have two distinct options available for the Solo 401k. One option available to you is what is known as a Roth contribution plan. Roth contributions are those that are made after-tax. This means that when you retire, you do not need to pay further taxes on your retirement funds as you start to make withdrawals. On the other hand, you may choose to make Traditional contributions. This means that you pay taxes when you make withdrawals, not when you contribute the money. Both options have their benefits, and which method you choose is entirely up to you!
  • You Can Take Out Loans. If you ever find yourself in a bind, you can take out loans of as much as $50,000 from your Solo 401k. Ideally, you would let this money mature until your retirement. But sometimes life can throw you a curveball and you have to figure out a way to navigate difficult financial times.

If you’re considering opening a Solo 401k retirement plan, consider a consultation with a plan provider today!

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