These past few months, we’ve had to rethink our definition of “unpredictable.” Things can change very quickly in our lives, and it’s imperative that we’re prepared.
You’ve probably been told to start or contribute to a 401(k) before. If you’ve been ignoring the advice or telling yourself you’ll “do it soon”...now is the time. And, if you’re a self-employed worker, the sooner you get started, the better.
Still not convinced? We’ve rounded up our top three reasons to have a 401(k) as a self-employed worker.
1. High Contribution Limits
As a self-employed worker, you’re granted some of the highest contribution limits among all the 401(k) options. Those with a Solo 401(k) have the option to contribute twice: as an employee, and as an employer -- on top of the “catch-up contribution” add-ons if you’re over 50 years old. While you’re in the stage of life that allows for these contributions, it’s a no-brainer to make them.
2. Deductions on Your Tax Return
All contributions to your 401(k) that you make under the employer role are deductible on your tax return. You may also deduct some contributions made as an employee, though both are subject to maximums. The IRS has a helpful worksheet to calculate your own retirement contributions here.
3. Safety Net for Retirement
Just like any other 401(k), it’s a good idea to contribute simply for the future payout. Your contributions can grow, tax-free, for years in a 401(k), ready for you to withdraw once you are eligible. Defer taxes on the money you’re trying to save anyway, and guarantee some financing once you’re ready to retire.
Ready to start investing in yourself? Through our partner company Integrated Solutions, we offer business liability insurance, surety bonds and payroll services, and more to support your and your small business. Get started through our website.
Note: Information sourced is linked. Visit the IRS’s publications on One Participant 401k Plans for more information.