With uncertainty abound in the world today, it’s more important than ever to consider retirement planning. For the self-employed, retirement planning is not always easy. In fact, it can be quite difficult to plan for retirement without the backing of a larger, more well-funded company.
However, a Solo 401k effectively solves the issues with which independent workers are presented. These plans provide numerous benefits, and many Solo 401k plan providers are ready and willing to help you set one up today. You just need to know what to look for in a provider to make sure you select the best one for your individual needs.
Why You Should Consider Starting a Solo 401k for Your Business
When it comes down to it, Solo 401k plans bring three main benefits to those who invest in them:
- Excellent Contribution Maximums
For your company, you can consider yourself both an employer and an employee. This means that you can essentially contribute to your plan from two different directions. As a result, Solo 401k plans offer some of the highest maximum contribution limits available on the market today. Specifically, you can save a total of $57,000 per year with a Solo 401k retirement plan.
- Roth and Traditional Options
There are two main options when it comes to how your plan contributions are taxed. You can elect to have your taxes taken out now, so that you do not have to pay taxes on this money in your retirement. This is known as a “Roth” plan, and is favored by many people.
Alternatively, you can choose to have your money be taxed when you take it out in retirement. This is known as a “Traditional” plan, and is also popular with many self-employed individuals.
Whether the Roth or Traditional option is better is up for debate. It will depend largely on your beliefs about how taxes may or may not change in the future.
- Loan Availability
Throughout the years, your business will likely go through many different changes. Hopefully these are all good changes, but in reality, there are often many challenging situations that business owners face. When these things occur, it’s always good to have a way to access some emergency funds.
When needed, you can take out a loan of as much as $50,000 from your Solo 401k. While you should avoid taking money out of your fund as much as possible, this may be unavoidable in certain circumstances.
Things to Look for in Your Solo 401k Provider
The following items should be strongly considered when you are searching for a Solo 401k provider:
- Cost
Some providers will impose fees when you open your plan or make changes. Look for a provider who has very low fees or none at all.
- Support
If you ever need help, you’ll want to know that your plan provider will be available to answer your call or email. Ensure that your provider offers excellent support services.
- Changes to Your Plan
If you need to modify or change your plan, it should be an easy, straightforward process. Check to see if your provider has an easy-to-navigate service that won’t take you hours to negotiate.
