Solo 401k for Consultant: Why is now the right time to invest for retirement?

“Preparation for old age should begin not later than one’s teens. A life which is empty of purpose until 65 will not suddenly become filled on retirement.”

 ~ Arthur E. Morgan

Very few questions share the complexity of this single financial one: How much money are you going to need in your retirement? For those who save less, they might end up taking part-time jobs in retirement. Those who save significantly higher might have to make certain sacrifices during their work life.

Self Directed 401k

Self Directed 401k

The same question becomes even more complicated in case of small business owners and self-employed individuals. Small business owners are not only responsible for their retirement savings but also for their employees’ retirement income. The percentage of self-employed individuals having retirement plans is usually higher among those with employees. If you are working alone or with your spouse and you do not have a retirement plan, you might have to prolong your professional life.

Why is now the right time to invest for retirement? According to Trading Economics, the United States Disposable Personal Income was the highest in January 2015 at $13,260 Billion between the years 1959 to 2015. The unemployment rate is under control, gas prices are low, and salaries have improved significantly over the last few months.

Solo 401k is a retirement plan that targets self-employed individuals and small business owners operating without full-time employees. This retirement plan has gained popularity in the past couple of years, primarily because of its flexible investment options and higher contribution limits. With a Solo 401k for consultant, you can contribute up to $53,000 in 2015 along with catch-up contributions of $6,000.

Solo 401k offers a wide variety of investment options starting with real estate, private businesses, private lending, precious metals, tax liens, and the traditional stock and bond options. In short, you can invest with more confidence and invest in industries that you understand. You can avail checkbook control feature and invest with complete freedom.

Financial turbulence is a common problem among small business owners. Sometimes, they require additional financial support for their business. Solo 401k allows participant loan of up to 50% of the overall account balance to a maximum of $50,000. In fact, you can apply for a loan for any reason at all including business expansion, inventory upgrade, and even for paying down your mortgage. Participant loan is available at prime rate plus one percent interest, which makes it affordable.

There isn’t any specific age to start saving for retirement and the safest bet is to start today.

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