The Solo 401k

ATTN: Solopreneurs – The Solo 401k is the secret wealth hack you didn’t know you needed.

If you are a business owner and your only employee is yourself, you can save a massive amount in taxes by opening a Solo 401k plan. These plans can be setup at a reputable firm like Charles Schwab, and often have low/no fees.

Advantages of a Solo 401k plan:

1) Contribute twice as much to retirement. 1x as the owner & 1x as the only employee.

2) Wide range of investment options available, including ETFs and Index-Funds.

3) Save up to $25k/yr in taxes in one year.

4) Make Roth contributions even if your income is above the Roth IRA limits.

5) Annual contribution limit is the less of: self-employed income or $69k; MUCH higher than a Traditional 401k or SEP-IRA.

Disadvantages of a Solo 401k plan:

​1) Must transfer to a regular 401k plan once you hire another full-time employee.

2) Solo 401k plans are required to file Form 5500-EZ with the IRS if it has $250k or more the end of the year.

3) Employer contributions are limited to 25% of your income and may involve additional tax complexity.

4) Some additional tax complexity depending on the legal structure of your company (S-Corp, C-Corp, LLC).

Does it sound like a Solo 401k may be a good fit for you? Click here for direct access to my calendar.