Isn’t now the time to open a Solo 401(k) to reduce taxes on your small business profits?
If you’re self-employed or a business owner and you’re worried about paying too much in taxes, you might want to check out the Solo 401(k). Saving for retirement may not be a top priority for people who love their jobs, but paying less taxes means you can keep more of your hard-earned money. Keep reading to find out if now is the time to start a Solo 401(k) plan for your business.
This time of year, I’ve been talking to quite a few business owners who are setting revenue and revenue records for their businesses. Some of them just filed their 2022 taxes and are worried about what their 2023 taxes will look like. One of the easiest ways to reduce your taxes is to pay yourself first and fully fund your Solo 401(k) plan.
The 3 Most Valuable Benefits of a Solo 401(k) Plan for Business Owners
Tax planning is an important part of owning a business. It’s not about how much you earn, it’s about how much you keep. … [+]
1. How a Solo 401(k) lowers your taxes
Since you’re busy building your business, you probably haven’t spent much time planning for retirement. Or maybe you’re killing yourself by working day and night to retire as soon as possible. Either way, a Solo 401(k) can help reduce your current taxes. Although it may not be obvious, paying less taxes as a business owner will make it easier to retire as soon as possible.
Solo 401(k)s often offer the most significant tax savings compared to traditional IRAs or SEP-IRAs. In 2023, you could potentially contribute $66,000 pre-tax to your Solo 401(k). For those over 50, this number jumps to $73,500.
2. Easier to set up than a traditional 401(k)
A Solo 401(k) plan is right for you For businesses that have no employees other than the company owner (and his or her spouse). This restriction makes setting up and running a Solo 401(k) much more flexible than a traditional 401(k).
Keep in mind that once you start hiring less than 5% employees, you will need to switch to a traditional 401(k) and all the regulations and limitations that come with these plans. While this is still a valuable tax planning strategy, it is more costly and burdensome.
Financial freedom is the day when work becomes an option. Get the most out of your Solo 401(k) … [+]
3. Achieve financial freedom faster
economic freedom This is the day when work becomes an option. Achieving financial freedom is a huge accomplishment and can help make running your business and life less stressful. A Solo 401(k) reduces the tax burden on your portfolio and income, helping you achieve financial freedom faster. The more you contribute to your account today, the more you compound and become a 401(k) millionaire.
More tax savings – add cash balance planning
If you’ve already maxed out your 401(k) contributions or $73,500 is less than 10% of your income. defined benefit pension plan When applied to tax planning strategies, even more taxes can be deferred. I recently set up a cash balance plan for a new client. He was able to contribute more than $400,000 of his money to family accounts, beyond his Solo 401(k). This retirement plan could save him more than $2 million in taxes over the next 10 years, and potentially even more if his income or tax bill increases during that period. .
Running a business for yourself means you choose to live your life your own way and on your own terms. With the benefits of a Solo 401(k), you can retire in your own way and on your terms. Find out how quickly and easily you can achieve financial freedom by saving taxes.
If you haven’t opened a Solo 401(k) plan by the end of the year, your contributions will be limited in 2023.
