If you are a freelancer, an independent contractor, or run a single-member business, you have a lot of responsibility. Namely, you are responsible for all of the good things that happen in your company, and all of the bad things. If you make a sale, congratulations! If you lose a client, it’s on you to decide what to do next.
But one thing you shouldn’t have to worry about is your retirement plan. As stressful as the process of thinking about retirement can be (even when it’s decades away), it’s something that is very important to consider for those who serve as their own boss.
What Is A Solo 401k?
Perhaps you’ve briefly researched different retirement plan options and have come across terms like IRA and 401k. But unless you went far into your research, you may have missed out on the information related to the Solo 401k.
The Solo 401k retirement plan is an option reserved exclusively for those who are considered the sole employer and employee within their business.
The plan offers incredible benefits such as:
- Massive Deferrals In your role as employee, you are able to defer as much as $20,500 into your 401k account. Furthermore, as an employer, you can save up to $40,500 per year. In total, you are able to put as much as $61,000 into your account annually.
- Roth and Traditional Plan Options. One of the biggest debates when it comes to finances and taxes is the question of how money should be taxed. Essentially, the two main tax options with regards to retirement plans are Roth plans and Traditional ones. With a Roth plan, your money is taxed when you make your deferrals. With a traditional plan, your money is taxed when you make withdrawals in retirement. Both options have their benefits. It’s entirely up to you which option seems like it will make the most sense for your business.
- Loan Availability. With issues such as natural disasters, viral pandemics, and other problems that disrupt our world, it can be hard when you don’t have a fall back plan, should times get tough. This is especially true for single member businesses, who don’t have anyone backing them if something goes wrong. Luckily, loans are available through a Solo 401k. In fact, Solo 401k members can take out loans of as much as $50,000 when needed.
Picking A Good Solo 401k Provider
If you’ve decided that a Solo 401k sounds like a good option for you, your next step should be to select the perfect Solo 401k plan provider for your needs. For instance, you’ll want to choose a provider that offers all of the following:
- No extra fees or hidden costs.
- Available customer service representatives, when needed.
- Intuitive setup and plan maintenance.
The above qualities, at a minimum, should be present in your plan provider. If you are shopping around for providers and you don’t feel that a certain provider can meet your needs, move on to the next one. This plan is going to be a part of your life for many years. You need to ensure that you have a good relationship with an excellent provider.