THE RACE: THE SOLO 401(K): WEALTH BUILDING STRATEGIES FOR THE SELF-EMPLOYED

Forty years ago, two women graduated from the same college and went on to work for the same company. They both had successful careers, both were happily married with two kids, and both had the goal of one day starting a business.

 When they each decided to leave their corporate jobs to pursue self-employment, they were making the same salary, and interestingly enough, they had the same amount of money invested in their employer-sponsored 401(k)s.

As you can see, so much about these two women were similar, but there was one big difference. And it wasn't apparent until they were ready to retire.

Here's what happened...

 Soon after starting their businesses, one of them decided to listen to her financial advisor’s recommendation to contribute each year to a traditional IRA, while maintaining the traditional 401(k) from her former employer. Over the next twenty years, the mutual funds inside her 401k and IRA went up and down. In the end, like most people, she saw an average return on investment and was pretty happy with the results.

 On the other hand, her former co-worker found a new way to invest. One day during a conversion with a friend, she learned about Solo 401(k)s. She had never heard of this type of retirement account so she asked a lot of questions. Eventually, she sought advice from a trusted CPA and tax attorney. These professionals mentioned that even though the Solo 401(k) was relatively unknown, they considered it the best investment vehicle for people who were self-employed.

 So after weighing her options, she decided to open up this new type of 401(k). Over the next twenty years, she was able to use her Solo 401(k) to invest in things outside Wall Street, such as real estate, foreign currencies, and mortgage notes. Investing became fun for her as she grew her retirement nest egg.

 And in the end, she was able to grow her investments considerably higher than her former co-worker, simply because she had more options and more control over the investment decision process.  

 That’s the power of the Solo 401(k)!

 Here’s what she learned over the past twenty years...

Traditional vs. Solo

 There really aren’t many differences between the traditional and Solo 401(k) in terms of how they’re structured. They follow all of the same rules including the contribution limit of $18,500 a year, but they diverge when it comes to who the account is for and who can contribute.

 Traditional 401(k)

• You can only get this retirement account if your employer offers one.
• The employer can be a public or private company.
• The employer and employee can both contribute.

 Solo 401(k)

• This is best for self-employed individuals without full-time employees other than a business partner or spouse.
• It doesn’t matter if you have a full-time job or not, any legal income you have on the side will qualify you for this account.
• You can contribute to this account both as an employer and an employee. You may also contribute to your spouse’s account.

 Who is it for?

According to Adam Bergman, ESQ., the author of Going Solo: America’s Best-Kept Retirement Secret for the Self-Employed, the Solo 401(k) can be used by a wide variety of people. It doesn’t matter where you come from or where you’re going.

 If you’re a 45-year-old electrical contractor about to get married…

 This plan is for you.

 If you’re an Architect at a firm but earn extra income leveraging your experience to help communities establish more affordable housing options…

 This plan is for you.

 If you’re a single mother of two employed as a school nurse who also makes a considerable amount of money selling crafts on Etsy…

 An IT Manager turned real estate agent who keeps an eye open for foreclosed properties you can buy, refurbish, and rent…

 A former senior executive who has stepped out on his own to start a management consulting business…

 This plan is for you.

 As long as you have some sort of income outside of a traditional job, you can benefit from a Solo 401(k).

Psst... Why the Secret?

 The sad truth is that a majority of experts haven’t even heard of the Solo 401(k), and if the “experts” don’t know about it, why would the Average Joe?

 Part of this is because the plan goes by a number of names, which is confusing. But even if the experts did know about it, it’s likely that they’d rather keep it a secret from you.

 Why?

 Because they only make money off of you if you invest in their products.

 A true Solo 401(k) allows you to invest in more than what’s offered by financial managers, advisors, and planners which means the profits stay in your pockets, not theirs.

 To get around this, some financial institutions are offering what they call Solo 401(k)s, but a pig in lipstick is still a pig. And if you can only invest in their chosen stocks, bonds, and other products, you’re missing out on options that could change your financial future.

 The Solo 401(k) AKA...

• Individual 401(k)
• Self-Employed 401(k)
• Uni 401(k)
• One-Participant 401(k)
• Self-Directed 401(k)

Pros of Going Solo

A Solo 401(k) plan offers the same advantages as a Self-Directed IRA, but with bonus benefits, giving you all the necessary tools to break out of the cave.

 Tax Benefits

You can contribute to your Solo 401(k) as an employer and employee. This means you can make...

•  Tax deductible contributions as an employer
• AND pre-tax contributions as an employee

 Ensuring that every contribution can supercharge your portfolio with tax-deferred growth potential.

 High Contribution Limits

The amount of money you can contribute to a Solo 401(k) per year completely dwarfs the limit of $5,500 for an IRA. 

• $55,000 annual contribution limit
• $6,000 catch-up contribution for those over 50 years old

 Loan Feature

You can borrow up to $50,000 or 50% of your account value (whichever is lower) at a low-interest rate for any reason.

 Need cash to put a down payment on a new home? No problem.

 Have a great business idea that just needs some money to get started? Go for it.

Get the rest here.