The Moola Masters Blog

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Financial Planning for Retirement: The business owner version

business owner retirement self employed Sep 09, 2022

Hi All!

Today is all about retirement account options for those of you who own your own business or have a side gig.


There are 5 different options.

The first is either a Traditional or Roth IRA. We talked about them in a couple of other blogs so take a peak for more info on those!


The next one is setting up a Defined Benefits Plan which is basically your very own pension plan. These are expensive to set up and not a lot of brokerages offer them anymore. They are out there for those of you who may be interested!


The most popular is probably the Solo 401K which is sometimes called a Self Directed 401K. This retirement account is for an owner who may have one employee if it is their spouse!  

Solo 401Ks can be set up as Traditional or Roth and can be set up thru any online brokerage company. If you are looking for specialized investments, like real estate or syndications, you may want to look for a company that specialized in the Self Directed 401K. You can, as an employee, in 2022, contribute $21,500 with a $6,500 catch up if you are over 50 years old yearly. Your spouse can contribute the same amount.

Some additional details:

You cannot contribute more than 100% of what the business made. The contributions are capped at 25% of your self employed income up to an income of $305,000. The total amount that can be contributed per year per person is $61,000. This includes "employee" and "employer" contributions.


Another option, for those with a few employees, is the SEP IRA. The rules for contributions are almost the same as the Solo 401K. In this account you are making contributions for your employees. You are also the one making all the investment decisions. All employees have to be given the same amount of money per year. This one can get expensive!


The last on the list is the Simple IRA. You can form this one through a brokerage if you have up to 100 employees. The maximum contribution for this one is $14,000 with a $3,000 catch up if over 50 years old. (As of 2022.) Your employees each have their own account and can contribute to it themselves! Typically the company will have to contribute to the employees retirement account as well. Normally it is a 3% match or a flat 2% of salary match.


I think we have pretty much covered all the common retirement accounts!

See you next week!

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