Last week, the Wall Street Journal had a good article about the benefits of a “Solo 401(k)” plan. The meetings that I have with clients that delve into these issues are the ones that remind me of the natural synergy in my clients. Many of my clients are business owners who also need help with their will or trust. When I first opened my firm, I didn’t always notice the dual needs of some clients. But as we dug deeper into their situations, I realized that often my clients need more than an isolated service. To help these clients, I’ve found some excellent accountants and financial advisors. They are able to work with my clients and me to create a strong team. Our team is then able to make sure that their business goals and estate planning goals are being met. Having a second and third set of eyes also helps us keep an eye on the little things as well.

What is a Solo 401(k)?

A Solos 401(k) is a type of retirement plan that is available to self-employed people. It allows business owners to contribute both as an owner and an employee. They can put away large sums of money and reduce income taxes. Another advantage is that you can choose between traditional tax-deductible contributions or after-tax Roth contributions. (If you are starting to get confused, now is a good time to talk to your accountant or financial advisor…) The current limits for contributions are $56,000 per year.

Sounds Like An Easy Win

These accounts, when you research them, seem like a no-brainer for self-employed people. The Wall Street Journal points out, however, that many people don’t even know that a Solo 401(k) exists! One of the reasons that the accountants and financial advisors I work with are so beneficial to my clients is that they know about these types of accounts. They’ve got them in their recommended financial structure for their clients.

But if you’re running a business with employees, then the Solo 401(k) becomes a bit trickier. Then you really need an accountant to assist you with the “nondiscrimination test that applies to regular 401(k)s.”

Setting up a Solo 401(k) is a good exercise for the folks on your business team. It takes some input from all corners and can be a very effective vehicle for your long-term planning.

Next Steps

If you are thinking of starting a business or already started your business and think a Solo 401(k) would be a good addition to your business, give me a call and we can sit down to discuss the process and what documents would be best tailored for your company – (877) AMAYERS.

Andrew Ayers
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I work with business and estate planning clients to craft legal solutions to protect their legacies.
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