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Solopreneur Money

Feb 8, 2021

Company-sponsored retirement plans are often people’s only vehicle to save for retirement, so when they take the plunge into self-employment they let their retirement saving fall by the wayside.

Do you have a retirement plan? If you are shaking your head, you are not alone. 

When you are in the thick of running your own business, researching a retirement plan is probably the last thing on your mind. However, if you keep putting it off, you will regret it down the road. 

On this episode of Solopreneur Money, we’ll explore the options you have to save for retirement so that you can find the one that best fits your goals. 

You will want to hear this episode if you are interested in...

  • Learning the retirement plan options for solopreneurs [1:32]
  • Understanding the tax ramifications of different retirement plans [3:38]
  • Discovering my favorite retirement saving vehicle for solopreneurs [7:22]

What are your retirement plan options as a solopreneur?

You may think that as a solopreneur you don’t have many choices for saving for retirement. But actually, solopreneurs have 6 options to choose from. There’s the traditional IRA, Roth IRA, SEP IRA, Simple IRA, solo 401K, and the defined benefit plan. Which one is right for you? That depends on your goals.

Questions to consider when choosing your retirement plan

When choosing a retirement plan you need to consider many factors. When do you want to retire? What does your cash flow look like? How is your business set up? How do you pay yourself? How much do you pay yourself?

Retirement planning is all about the taxes

What are the differences between the 6 retirement plans? It’s all about the taxes. You’ll either get a tax deduction today and pay it later or you’ll pay taxes now and withdraw tax-free down the road.

Most retirement plans available to solopreneurs will provide a tax deduction upon deposit and provide tax-deferred growth. This means that the money will grow without taxes needing to be paid until it’s time to withdraw the money. When you withdraw you will be taxed at your marginal tax rate at that time. This means that when you withdraw money, you will be taxed at a lower rate since you will no longer be working and making as much money as you once did. The math works out well. 

In addition to these tax-deferred options, there are options that use after-tax dollars. With these options, you pay taxes on the money now and then you can take tax-free withdrawals when the time comes. Listen in to hear the details about the different retirement plans so that you can discuss your options with your CPA. 

Create the retirement of your dreams

As a solopreneur, you have the freedom to create the lifestyle of your dreams as well as the retirement of your dreams. Choosing the right retirement plan can give you so many options and allow you to create tremendous wealth which in turn gives you the freedom to create the life you want. I’ve watched it happen and help it happen. It just takes a little bit of planning.

If you need help setting up your retirement plan reach out to me. You can schedule a consultation by clicking start here on my website or send me an email. Check out the links below to get started.

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