You’ve worked hard. You’ve poured your heart and energy into your business. Now you should decide what to do about retirement planning. Because it’s not how much money you make that’s important but how much money you keep. Taking the time to do thoughtful financial planning is essential and necessary to get the benefits of all your work. A good financial planner can be worth their weight in gold – literally and figuratively.
In recent years, a new type of retirement plan has been created specifically to to help entrepreneurs. It’s called a Solo 401K. According to Paul Stramberg, CPA and financial planner, this plan has many advantages. It allows you to invest more of your pre-tax income so that you can save more and defer (put off) paying taxes on it until you retire. When you compare the different plans, the benefits are obvious.
For example, if you make $100,000 here is what you are allowed to invest with different plans:
- A Simple IRA – $17,000
- SEP IRA ——- $25,000
- Profit Sharing – $25,000
- Solo 401K —- $45,500
There is another big benefit – Entrepreneurs often worry that if they contribute too much money to retirement accounts and cash-flow problems arise, they won’t be able to access their money. But with a Solo 401K, (often called a SoloK), you can borrow up to $50,000 against it at the prime rate of 3% interest and pay it back over 5 years. This can help people save for the future and sleep at night in the present!
You also get to decide how you want your money invested within the plan – in terms of stocks, mutual funds and other options. This needs to be set up in the calendar year that it is used.
This plan has only been around for a few years. Many hard working business owners are not aware of the benefits. If you think this may be the right option for you, set up a free consultation to learn more and get all of your questions answered.
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