You need to commit full-time if you wish to secure your future. It involves planning and saving money so that you’ll have the resources to spend when you are no longer in the work force.
But if you are an independent practitioner or you own a small business, then it is essential for you to consider applying for a solo 401K plan. Years back, only employees were able to apply for this type of retirement plan that’s usually offered by companies as benefits. After several years, the solo 401K for self-employed and business owners was created so that these folks are also able to save for their retirement.
A portion of a business owner’s income is taken yearly and added to the 401K savings plan. This type of retirement plan calls for a maximum 401K contribution of $54,500. The 401K maximum contribution for self-employed individuals or business owners are generally set at $49,000 for those who are below 50 years old; the catch up contribution is set at $5,500 for those who are 50 and over.
Now, is solo 401K the right retirement plan for you?
Certainly. If you earn substantial income from your business, then it’s best to save a portion of that into your retirement. If you have more earnings but cannot contribute the entire amount to your contribution, then you may have to save the in the bank or use them up as separate investment.
It is possible to grow solo 401K savings by investing the funds in mutual funds, stocks, tax liens, and real estate, to name a few. Saving in the bank is okay, but with 401K funds, you can invest them in more profitable ventures such as real estate, where you can spend minimal cost for man power and capital. In the bank, your money will only earn minimal amounts of monthly interest.
It is also possible to contribute to a solo 401K on a pre-tax basis . This may help lower your income tax and may also allow you to contribute above the maximum 401K contribution, particularly if your spouse is your employee. You need to be aware, though, that will be taxed if you will withdraw your money after retirement.