Set up a 401(k) for Your Business
If you are a baby boomer worried about the erosion of your retirement savings, and you have extra cash in your business this year (”Cash?” “What’s cash?”), consider starting a 401(k) for your business instead of getting an IRA. You can start a 401(k) even if you have a sole proprietorship. As a matter of fact, it’s easier to start a 401(k) if you have no employees, because the administrative regulations and restrictions are less.
The advantage of a 401(k) over an IRA is that you can put more money in it. You can put $15,500 in the 401(k) plan ($20,500 if you are 50 or older) from your own income. Then you can contribute 25% of your profits, up to $46,000 ($51,000 over 50).
You can use any qualified investment - securities, not collectibles. (A “qualified” is one that meets IRS requirements.) Get the lowest cost securities possible.
To set up a 401(k) plan for your business, you’ll need the help of an investment advisor, but here are the basic steps: (from the Department of Labor website):
And don’t forget that your costs for setting up the plan are also tax-deductible. Remember, I’m not a financial planner or tax consultant, so check with your advisors before you set up something like this.
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POSTED IN: Baby Boomer investors, Boomers nearing retirement, Finance, business taxes
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