When a self employed retirement plan holder reaches 50 years old, he or she is eligible to contribute extra amount to his 401k or IRA. This amount is called the catch up contribution which some participants are not aware of. This allows an account holder to contribute more on his retirement savings as he comes close to his retirement years. If you are not maxing out your contribution when you were still young, the opportunity to catch up with the contribution to your account is a good way to satisfy your retirement funds so that it could serve you better when you decide to retire.
As you reach the age of 50, it is best to max out and make catch up contributions on your self employed retirement plan so that living comfortably in retirement could be achieved
The best retirement plans for self employed like the Solo 401k allows you to add additional contribution amounting to $5,500 when you reach 50 years of age which makes your contribution limit up to $23,000. This catch up contribution can be made pre-tax or to the Roth subaccount if you wish to receive tax free retirement money in the future. If you are going to make withdrawals or distributions at the age of 62, you have $66,000 additional funds on your account aside from the earnings that this amount will produce from its investments. As for the Checkbook IRA or the Self directed IRA which is the best retirement plan for self employed individuals and self-directed IRA investors who are not eligible for the Solo 401k, there is $1,000 additional catch up contribution that you can put in your account yearly.
When you max out your contribution up to the limits and when you take advantage of these catch up contributions on your self employed retirement plan, you are putting more money in your nest egg. Bear in mind that several years from now, inflation rate is much higher than what we experience now. If you want your retirement income from your retirement plan to be aligned or to get ahead of the inflation rate, contributing up to the limits is the best solution.
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