If you’re a sole-proprietor, a single-member LLC or a corporation with no employees except your spouse and don’t currently have a retirement plan - a solo 401(k) is something you might want to consider setting up before year-end.
The reason you want to set it up before year-end is because that will allow you to fund it in 2024 before you file your taxes on 4/15/24, for the 2023 tax year. But it needs to be established by year-end in order for you to do that.
So, what exactly is a solo 401(k)?
Think of it as a regular 401(k) plan, but sprinkled with entrepreneurial pixie dust. It lets you stash away serious cash for your future self, all while enjoying some sweet tax advantages along the way.
Here's what makes it so fantastic:
Contribution superpowers: You can contribute way more than with a traditional IRA. In 2023, you can sock away up to $66,000 (that's $22,500 as an employee plus $43,500 as the employer), and if you're 50 or over, you can add another $7,500 catch-up contribution. Talk about retirement-fueling firepower!
Tax taming: Your contributions? They're typically tax-deductible, meaning you get to lower your taxable income today. Plus, your retirement savings grow tax-deferred, so you won't pay a dime on the gains until you withdraw them in retirement (when you're likely in a lower tax bracket, cha-ching!).
Double duty magic: You can be both the employee and the employer, which means double the contribution fun! So go forth and max out those limits like the retirement rockstar you are.
Investment flexibility: Choose your own adventure! You get to decide where your hard-earned money goes, from mutual funds to individual stocks to that hot new cryptocurrency you heard about (just do your research before diving in, okay?).
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