We’re always glad to get the word out about amazing opportunities to cut your tax bill and beef up your retirement savings at the same time.
So thank you to Brett Arends of MarketWatch for asking us to chime in on how self-employed people can save money by setting up their own retirement plans.
In his June 4 column for MarketWatch, Arends said he was stunned to learn how few self-employed people were familiar with plans like SEP-IRAs or Solo 401(k)s, both perfectly suited to independent businessmen and women. In fact, not one of the persons he spoke with was aware of how self-employed retirement plans are a foolproof way to slash taxes and build retirement savings.
The result? “They’re paying way too much in taxes to Uncle Sam,” says Arends. “And they’re leaving money on the table. Big time.”
We couldn’t agree more.
“We help many clients open small business accounts like SIMPLEs [another type of self-employed savings vehicle], solo 401ks, and SEPs,” commented Mari in the Marketwatch article. “Very few people know about them. The solo 401(k) is a fantastic account that should be used more extensively.”
Here’s a quick example. One of our clients runs her own successful consulting business but has no retirement plan. Without access to a disciplined plan, she is not saving regularly for retirement. To make it worse, she is paying too much in taxes on her business income. The solution? We helped her set up a solo 401(k) for 2019. Right off the bat, she maxxed out a deductible 401(k) employee contribution in the amount of $19,000, followed by a $18,000 deductible profit-sharing contribution. That adds up to an instant $37,000 in savings in her new 401(k) account, and a $37,000 tax deduction. Nice work!
The Takeaway: Ask us how the right retirement strategy can get you to your goals faster (and with lower taxes!). We’re also happy to consult with your tax preparer to make sure you are taking advantage of every possible tax break before filing your taxes on July 15.