Have you thought about what you’d like to do in retirement? Whatever it is you’re planning will require healthy retirement savings.
As a solopreneur, you are responsible for setting up your own retirement nest egg, but the options can seem a bit confusing.
On this episode of Solopreneur Money, we’ll review the various types of retirement funds, their limitations, and their benefits, and discuss how you can get a jump start on saving for retirement.
You will want to hear this episode if you are interested in…
- How to reduce your tax bill [3:12]
- The SEP IRA [9:25]
- A Simple IRA 10:00
- The Solo 401K [11:42]
- The Roth Solo 401k [14:12]
- A defined benefit plan [15:20]
- Your call to action [19:35]
Decide whether to use pretax dollars or post-tax money
There are several retirement saving options open to solopreneurs. Solopreneurs can use traditional IRAs, SEP IRAs, Roth IRAs, Simple IRAs, and 401Ks. You can even choose more than one way to save. The option you choose depends on what your goals are. All of the options except the Roth IRA have pretax benefits.
The Roth IRA uses post-tax money to invest for tax-free growth. The present contribution limit for a Roth IRA is $6,500 for people who are under 50 years old and is only available for those making less than $225,000.
Pretax options can help you save on taxes
Taking action now to plan for retirement will increase your wealth so that you can build a stream of income when you decide to retire. Creating your solopreneur benefit plan will not only create wealth and provide for your future, but it can also reduce your taxes. The more successful you are the larger your tax bill will be. You can combat these high taxes by taking advantage of pre-tax retirement savings plans.
If you are interested in reducing your taxes while saving for retirement there are several tax-deductible options to choose from.
- The SEP stands for Simplified Employee Pension. This fund is funded it by your business and can reduce your bottom line. It is a way to set up an old-school pension for yourself. You can contribute up to $66,000 per year to a SEP
- The Simple IRA is like a 401K in that the funds you contribute are deferred from your salary and can be matched by the company. You can contribute up to $15,500 from your salary and then the company can offer a 3% match which will further reduce your taxable income.
- The Solo 401k has the same idea as the 401k with all the traditional benefits of 401K offered by larger companies. The limits are the same as a regular 401K: $22,500 annually. You could also use a profit-sharing contribution of 25% of your salary if you are a W2 employee.
Listen in to learn about the Roth Solo 401K, defined benefit plans, and more. Learn how you can put more money away, grow your wealth, and pay less in taxes. If this all sounds complicated for you reach out to have a chat so that we can discover the best way for you to start saving for retirement.
Connect With Gabe Nelson
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