Business And Finance

How a Solo 401k Plan Will Benefit Your Business

Being out on your own is an extremely liberating feeling. You decide how much you work, when you work, and where you work. There is no boss breathing down your neck or barking at you about deadlines and productivity.

However, the self-employed life is not all roses. It takes a lot of hard work to make it on your own. Additionally, one must carefully consider how they will structure their retirement plan when they don’t have the resources of a large company behind them.

Enter the Solo 401k.

The Solo 401k is a retirement plan that is reserved only for those who are self-employed. The plan has numerous benefits, each of which will be discussed further in this article.

What are the Benefits of a Solo 401k Retirement Plan?

While the benefits of a Solo 401k plan are plentiful, the main ones are as follows:

  1. Tax Options. You have the ability to decide when your money is taxed with a Solo 401k. With the “Roth” option, your contributions are made “after-tax”. This means that no further taxes will be imposed when you are ready to make withdrawals in your retirement. With the “Traditional” Solo 401k, your money is taxed as is withdrawn.
  2. Significant Contribution Amounts. The Solo 401k enables you to contribute as much as $19,500 per year in your capacity as employee. Additionally, you can contribute as much as $37,500 as an employer. Because you serve as essentially two people within your company, you can contribute a grand total of $57,000 to your plan per year.
  3. Availability of Loans. As a self-employed individual, you have few resources to lean on. Therefore, you have the option of taking out a loan of up to $50,000 from your Solo 401k retirement fund. Obviously, this is not something you should do without carefully considering every other option available to you, but if you find yourself in a tight spot, you can take a loan from your fund.

What Should You Consider with Regards to Your Solo 401k Retirement Plan?

The process of setting up a Solo 401k is fairly simple and intuitive. However, there are a number of things you’ll want to consider before choosing a plan provider:

  • Are there extra fees? Some providers will charge extra fees and have associated costs with their plans. If possible, it is best to avoid these providers in favor of those who impose no such fees.
  • How can I get help if I need it? Ask about your provider’s customer service options. They should be able to be reached through multiple means such as phone and email at a minimum.
  • What does the plan management and set-up process entail? You don’t want to have to spend hours navigating a complex system to set-up and manage your plan. The whole process should be easy and your plan provider should provide you with a platform you can navigate without much training.

Are you ready to sign up for a Solo 401k retirement plan? Contact a plan provider today to learn more!