You Are A Sole Proprietor: How About A Solo 401(k)

I am seeing more and more people quit the corporate America lifestyle and venture into becoming their own business owner.  This shape of a business owner can be a freelancer, consultant, or someone who actually starts up a ‘brick and mortar’ operation.    Many of these folks will ask questions about whether they should incorporate their business, which I have discussed in other articles.    Once they become profitable, they often ask which kind of retirement plan would suit them the best.   For someone who is a sole business owner, the Solo 401(k) has been around for about a decade and provides a great alternative to helping maximize your retirement contributions.   Here’s a little history on the Solo 401(k) and how it can be a smart money move for your business. The Solo 401k came about in 2002 after Congress passed Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). EGTRRA added some small paragraphs to the tax code that put ...

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Three Mistakes With Retirement Planning Assumptions

When you last did your projections for retirement through the tools offered from your 401(k) plan or the book your financial advisor put together, are you sure the assumptions that were made were explained to you clearly?    Or, did you challenge each assumption made within the financial plan to be certain that the assumptions matched your level of risk tolerance.   The assumptions made within your financial plan can be very conservative or very aggressive depending on your viewpoint about planning for your retirement.   Making assumptions is something we do every day in our lives.   Essentially, as assumption is nothing more than something taken for granted or accepted as true without proof.  In other words, it is belief without proof.   When it comes to your retirement, you need to ask about these three assumptions or your retirement plan may really be nothing more than a pipe dream. 1.) Inflation Assumption – Most financial plans give you or a financial advisor a ...

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Do you need disability insurance?

There are many types of insurance programs to manage these days. Yet, one of the programs most misunderstood by employees of companies and small business owners is the need for disability insurance. Since there are so many nuances of disability insurance, here are some key questions to ask yourself regarding your personal situation. What percentage of my income will you replace if I become disabled? At most employer programs it will be between 50% and 66%.  Will you cover commissions or bonuses on top of a base salary? In most cases, your employer will only cover your base salary. If you have a large bonus program or work commissions, you need to really review the fine print of your group policy.  What about 401(k) or other retirement contributions? Generally, this is not covered. The big question then is how will you continue to fund your retirement goals? Can the payout go up as my income goes up in the future? ...

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