You may have an IRA or have considered investing in one for its tax benefits, but with the new tax changes, a solo 401(k) may be more beneficial. IRA’s allows you to take $5,000 (6,000 if age 50 or older) or taxable compensation as a tax deduction off of your current years income taxes. This can save you some money if you were going to set some money aside anyways.
Now see what happens when you "go solo." For 2010, you can defer up to $16,500 of compensation to your 401(k) account, plus you can make an extra catch-up contribution of $5,500 if you’re age 50 or older — the same as with elective deferrals to a traditional 401(k).
Of course, the limits on deductible employer contributions still apply, but here’s the kicker: Thanks to a recent tax-law change, elective deferrals to a solo 401(k) don't count toward the 25% cap. So, you can combine an employer contribution with an employee deferral for even greater savings.
I know that is a lot to throw at you. We can help you determine if a solo 401(k) plan meets your needs. Call us at 915-857-8158 to schedule an appointment.
P.S. You may be able to save thousands more for retirement with a solo 401(k) plan, just give us a call to see how much we can save you.