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Why Start a Solo 401

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Written by Christopher Price

Help Secure Your Future: The Solo 401(k) Advantage for Business Owners

Are you steering your business towards success but putting your own financial future on the back burner? If you’re a solo entrepreneur, it’s crucial to align your retirement planning with your business achievements. The Solo 401(k) is not just a retirement plan, but a pivotal financial tool that empowers you to save robustly, reap significant tax benefits, and tailor contributions to suit your business’ ebb and flow. Imagine a retirement plan as flexible and driven as you are, that is designed to maximize your savings and optimize your tax situation, all while keeping administrative burdens light. This is the Solo 401(k) advantage — let’s explore why it’s the savvy entrepreneur’s choice to help secure a prosperous future.

The Solo 401(k): A Smart Investment in Your Future

A Solo 401(k) offers a unique combination of flexibility, high contribution limits, and tax advantages that make it an exceptional choice for business owners with no employees other than their spouse. Here’s why opening a Solo 401(k) could be one of the best decisions you make—not just for your business, but for your future.

Maximize Your Savings

With contribution limits significantly higher than other retirement options, the Solo 401(k) allows you to save up to $69,000 in 2024—or $76,500 if you’re 50 or older. This includes $23,000 as elective deferrals plus an additional 25% of your compensation as employer contributions. Such high limits enable you to accelerate your retirement savings and make up for years where you might not have saved enough.

Exceptional Tax Benefits

Contributions to a Solo 401(k) can be made pre-tax, reducing your taxable income for the year, and potentially placing you in a lower tax bracket. The funds in your account grow tax-deferred, meaning you don’t pay taxes on investment gains until you make withdrawals in retirement. For those who prefer the Roth option, contributions are made after-tax, but withdrawals are tax-free in retirement—a beneficial choice if you expect to be in a higher tax bracket later.

Adaptability to Business Fluctuations

One of the greatest benefits of the Solo 401(k) is its adaptability. Unlike other retirement plans that might require consistent contributions, the Solo 401(k) allows you to adjust your contributions based on the financial health of your business. In profitable years, maximize your contributions to save on taxes and boost your retirement nest egg. In leaner years, reduce contributions to keep more cash on hand.

Borrow from Yourself

Many Solo 401(k) plans allow you to borrow up to 50% of the account value (up to $50,000), providing an accessible source of funds without a credit check. Whether you need capital for business investments or personal emergencies, a Solo 401(k) loan can be a lifeline with the repayment going back into your retirement savings.

Simplified Management

As a solo plan, you’re spared the complicated compliance requirements and administrative burdens that come with larger 401(k) plans. This simplicity is invaluable for entrepreneurs who need to focus on running their business without the hassle of managing a complex retirement plan.

Control Your Investments

A Solo 401(k) offers you the freedom to choose how your retirement funds are invested. From stocks and bonds to mutual funds and even real estate, you can tailor your investment portfolio to meet your specific financial goals and risk tolerance.

Making the Right Choice

For solo entrepreneurs, the future is not just something you hope for—it’s something you build. A Solo 401(k) isn’t just a retirement plan; it’s a declaration of your long-term vision for both your personal and business success. By investing in a Solo 401(k), you’re not just preparing for a comfortable retirement—you’re ensuring that your business’ most valuable asset, you, is secure and well-cared for in the years to come.

Starting a Solo 401(k) is easier than you might think. Consult with a financial advisor to discuss your specific circumstances and choose a plan provider. With minimal paperwork and ongoing management, you could be on your way to maximizing your retirement savings and tax benefits this fiscal year.

Don’t let another year pass without taking full advantage of one of the best tools available for self-employed business owners. Open a Solo 401(k) today and take a significant step toward securing your financial future.

Representatives do not provide tax and/or legal advice.  Any discussion of taxes is for general informational purposes only, does not purport to be complete or cover every situation, and should not be construed as legal, tax or accounting advice.  Clients should confer with their qualified legal, tax and accounting advisors as appropriate. Securities and investment advisory services offered through qualified registered representatives of MML Investors Services, LLC. Member SIPC.

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