5 Helpful Tips on Individual Solo 401K Contributions

Check out these 5 Helpful Tips on Individual Solo 401K Contributions. If you are self employed as an entrepreneur or blogger, establishing an individual solo 401K plan is a fantastic way to save for retirement. I can’t rave enough about the benefits of establishing Solo 401K if you are self employed.

I wish I knew about the benefits of establishing an individual 401K earlier in my journey as an self employed business owner! If you don’t have the luxury of working for a large corporation that provides you with a generous 401K plan, definitely check out our 5 Helpful Tips on Individual Solo 401K Contributions.

5 Helpful Tips on Individual Solo 401K Contributions

I established my i401K with Vanguard and it’s been an amazing retirement vehicle for me to minimize my taxable earnings and save for retirement. Hopefully, these quick tips will help you learn how to get started saving with this retirement vehicle.

Here’s my 5 Helpful Tips on Individual Solo 401K Contributions to give you the highlights in a nutshell.

  1. If you want to contribute for the 2019 tax year, you must have already opened your i401K account in 2019. Note: If you haven’t yet opened your own Solo Individual 401K account, you must set up and open your i401K account by December 31st of whichever tax year you want to begin contributing. The year you first begin to contribute and set up a i401K must be during that given tax so you’ll need to have it set up before December 31st.
  2. You must make your own EMPLOYEE contribution before December 31st of any given tax year. Employees may defer 100% of their compensation up to $19,000 for the 2019 tax year.
  3. You can match your own EMPLOYEE contributions as an EMPLOYER and this can be deductible as a business expense. AWESOME! Finding a way to reduce your net income will reduce the overall taxes you are required to pay the government. Why not pay yourself instead if possible?
  4. The “Employer” match can come later at tax time once you run the numbers and see where your income and expenses end up! (For example, I can contribute in 2020 for the 2019 tax year once my tax advisor runs the numbers and sees what is available for me to contribute.)
  5. The combined amount of employer plus employee contributions can’t exceed $56,000 for the 2019 tax year.

Read all the specific contribution rules for the i401K on Vanguard’s website.

Why Create & Contribute to a self employed i401K?

If you are self employed, this is a way to have 401K benefits. Yay! Why pay more taxes if I can pay myself instead? This has been a genius way to reduce our taxable income and let my money GROW over time. We are big investors and retirement savers and I would much rather pay myself than the government!

5 Helpful Tips on Individual Solo 401K Contributions

As a dual income family where my husband works in Corporate America and I’m self-employed, this has been a way for me to stash away lots of my income and then match my own income as an Employer to reduce my overall tax bill too!

In good years you could donate more, in lean years less. In strong years, you can match yourself more too. The employer match is all a biz expense as well which will further reduce your net income and taxes you pay to Uncle Sam.

Have you started saving for retirement?

Do you feel overwhelmed at the thought of planning for retirement?

Check out our post below highlighting the best 3 easy retirement saving options for bloggers or entrepreneurs to implement into your business planning and lives.

Maybe you are already participating in one or more of these retirement vehicles annually. If not, there is no time like the present to get started saving!

Best 3 Easy Retirement Saving Options for Bloggers or Entrepreneurs

Best 3 Easy Retirement Saving Options for Bloggers or Entrepreneurs

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