The self-employment route is tried by many but only a few survive this path. This is a high-risk/high stakes journey where unforeseen challenges are lurking around every corner.
Today you may feel like you are on top of the world, and tomorrow you may feel like the world is crumbling all around you.
One minute you are in complete control of the wheel, and the next minute you are figuratively falling off the cliff. The failures seemingly outweigh the successes by a long shot.
Such is life for us entrepreneurs...
But if you are anything like me, one of the main reasons that you embarked onto this treacherous road of entrepreneurship is to pursue freedom. To truly live life on your own terms and become the CEO of your own operation.
However, being self-employed does not give you an excuse to neglect to save & invest for retirement.
You must have Generational Wealth at the forefront of your mission in order to provide the greatest amount of value to others and to leave behind a legacy before it is all said and done.
With that said, let's explore a few of the self-employed & small business owner retirement planning options.
Simplified Employee Pension Plan (SEP-IRA)
This plan is best suited if you are a solo-operation with no or a few employees. The primary differentiator with this plan is that only the employer can make contributions, but they are tax-deductible as a business expense.
As of 2019, the employer can contribute up to 25% of eligible employee compensation or up to a maximum of $56,000.
The employer must contribute the same percentage amount to employee accounts as they do to their own account within any given year.
Savings Incentive Match Plan for Employees (SIMPLE IRA)
This plan is better suited if you have a larger company with up to 100 employees with no other retirement plan in place. The primary differentiator with this plan is that both the employer and the employee can make contributions.
As of 2019, mandatory business contributions of either 100% match on the first 3% deferred, or a 2% nonelective contribution on behalf of all eligible employees.
The employee may contribute up to 100% of eligible compensation through salary deferral up to a maximum of $13,000 for 2019.
Self Employed 401(k), also known as Solo 401(k)
This plan is best suited for you if you have no employees other than your spouse, with no plans to ever add any employees, and this is the primary differentiator as compared to the other self-employed plans.
As of 2019, the employer can contribute up to 25% of eligible employee compensation or up to a maximum of $56,000.
A maximum of $19,000 is allowed for salary deferrals. However, the maximum is $24,500 for 50 and older.
This is not an exhaustive list of your options but this should give you a strong framework on the path to creating Generational Wealth.
In conclusion, keep Generational Wealth planning at the forefront of your mission and DO NOT neglect to invest for retirement.
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Disclaimer: Hudson Wealth Management, LLC (HWM) is a FINRA registered investment adviser firm. Investing in securities involves risks, and there is always the potential of losing money when you invest in securities. Before investing, consider your investment objectives and HWM's fee schedule. The information provided herein is for illustrative purposes only and does not constitute personalized investment advice, recommendations or solicitations to hold, buy or sell any investment or security of any kind. All images and return figures shown are for illustrative purposes only and are not actual customer or model returns. Past performance does not guarantee future results.
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