Planning for Retirement
As a business owner, or entrepreneur, the last thing on your mind is retirement. A business owner is usually too busy, and has too many things on his or her plate to even begin thinking of doing nothing someday, especially if that day seems so far away. Retirement? No way, who has time for that!
Even so, the best time to start planning for retirement is today. Specifically, right this minute. It’s never too soon to start planning for retirement. The most important thing you can do is start a retirement account. As a self-employed business owner you have four options that you can use starting today to put away money now for your retirement: a solo 401(k), a Roth solo 401(k), a SEP-IRA, and a Simple IRA.
Solo 401(k)
In order to open a Solo 401(k) account you must have taxable compensation, i.e. income. There is no income limit for contributions. With a Solo 401(k), a person can set aside up to $49,000 USD.
Roth Solo 401(k)
The primary difference between a Solo 401(k), and a Roth Solo 401(k), is the tax status of the funds making up the contribution. A Solo 401(k) is funded by pre-tax dollars. This means that you can deduct the contribution amount from your taxes in the year of that the contribution was made. A Roth Solo 401(k) in contrast is funded with after-tax dollars. The amount contributed into a Roth Solo 401(k) is not tax deductible, because the taxes for that money have already been paid. The advantage of a Roth Solo 401(k) is that the funds can accumulate without worrying about tax consequences when the money is taken out once in retirement.
SEP-IRA
This type of account is also funded with pre-tax dollars. An SEP-IRA can be rolled over into a Solo 401(k) for greater tax advantages and enhanced benefits.
SIMPLE IRA
SIMPLE is an acronym for Savings Incentive Match Plan for Employees. It was designed to be a less expensive, and simpler method of setting aside funds for retirement.
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Categories: Personal Finance, Uncategorized Tags: 401(k), Retirement, Roth Solo 401(k), SEP-IRA, Simple IRA, Solo 401(k), Tax, Tax deduction
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Categories: Business, Incorporation Tags: Business, business structures, Corporation, Form Your Own Corporation, Incorporation, Lawsuit, Limited liability company, LLC, Partnership, Small business, sole-proprietorship, Start Up, Start Your Own Business, starting a business, Tax
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