Perhaps you’ve recently taken the leap and started a solo venture. Or maybe you’ve been self-employed for years, but never gave much thought to your retirement plan. Whatever the case may be, if you operate a single-member business, you should strongly consider starting a Solo 401k retirement plan.
In this article, we will outline the benefits of a Solo 401k plan and what to look for in a plan provider.
Why Should I Start a Solo 401k Retirement Plan?
There’s no telling what the future holds, but effective retirement planning is crucial to being prepared for your later years. A Solo 401k plan is the best option available for self-employed individuals for the following reasons:
- Contributions. If you are self-employed, you are seen as two distinct people within your company, at least as far as contributions to your retirement plan are concerned. As an employee, you can contribute as much as $19,500 every year to your plan. Additionally, as an employer you can contribute up to $37,500 every year. All told, you can invest up to $57,000 per year toward your plan.
- Taxes. It’s always good to have options. With a Solo 401k plan, you are afforded options when it comes to how your contributions are taxed. The “Roth” Solo 401k option enables you to contribute after-tax dollars to your fund. This means that when you are ready to start making withdrawals in your retirement, you will not need to pay any further taxes on the money. However, you also have the option to make “Traditional” contributions to your retirement fund. These are essentially the opposite of “Roth” contributions, as your money is taxed as you make withdrawals, not as you make contributions.
- Loans. It goes without saying, but being out on your own in business is hard work. You don’t have a big company backing you if a tragedy should occur or if something goes wrong. For this reason, a Solo 401k enables you to take out loans of up to $50,000 when needed.
Solo 401k Providers
At this point, you may be convinced that a Solo 401k is the perfect plan for you. But how do you pick between all of the available Solo 401k providers? While you may have needs which are specific to your business and industry, some general things you’ll want to look for in a provider include:
- Transparent Fees and Costs. Search for a plan provider who doesn’t impose extra fees and costs to manage your retirement fund. You have enough expenses in your life, you shouldn’t have to pay extra for your retirement plan.
- Excellent Customer Service. When you have questions, your provider should be able to provide answers. Additionally, you’ll likely want to work with a provider who can service your questions through phone, email, and chat options.
- Intuitive Plan Management. If you need to make changes or modify your plan, you shouldn’t have to spend hours navigating the platform. It should be easy to find what you need, make the changes you want, and move on.