Self-employed individuals enjoy the benefits of absolute freedom in their business ventures. They make the decisions of when to work, how to work, and who they work with.

However, the self-employed are often in a tough spot when it comes to retirement planning. They don’t have access to the plans that large companies can offer employees as a result of all of their available resources.

Fortunately, an answer to this problem has come along in the form of a Solo 401k.

Why is a Solo 401k a Good Choice for My Business?

Solo 401ks offer three major benefits to self-employed workers such as freelancers and independent contractors:

• Excellent Tax Deductions. With a Solo 401k, contributions can be made as both the employer and the employee. The contribution amount available comes to a grand total of $57,000 a year ($19,500 per year as an employee and $37,500 per year as an employer).
• Option to Defer Taxes. Solo 401k plans offer both “Roth” and “Traditional” options which enable you to make after-tax and pre-tax contributions respectively. Depending on the nature of your business and what taxes will look like in the future, the choice is entirely up to you.
• Loan Availability. As with anything great, there are always drawbacks. The same is true for a Solo 401k. If you find yourself in a tough spot financially, you’ll likely have very few options. However, your Solo 401k plan enables you to borrow the lesser of $50,000 or 50% of your plan’s value if you need to do so. Obviously, it is best practice to let your retirement money grow without touching it, but unfortunate events do come up. When they do, you’ll have options with your Solo 401k.

How Do I Start a Solo 401k Plan for My Business?

Setting up a Solo 401k is a simple step-by-step process:

1. Select a Solo 401k Provider. Numerous providers can be easily found online.
2. Complete All Required Forms. You’ll need to fill out the application forms during this stage and select whether you want to make “Traditional” or “Roth” contributions.
3. Determine How You Want to Set-up Your Contributions. Depending on your needs, you may choose to invest in mutual funds, stocks, bonds, or other options.
4. Watch for Important Deadlines. As an employee, you need to be mindful of the December 31^st deadline for investments. However, employer contributions can be made up until April 15^th.

What Should I Look for in a Solo 401k Provider?

Strongly consider the following 4 factors when selecting your Solo 401k provider:

1. Plan Costs. Look for plans that have little or no extra costs.
2. Plan Flexibility. If flexibility in your retirement plan is important to you, make sure your provider allows for this.
3. Customer Service. Ensure that you have access to an excellent customer service team who can answer any questions you may have.
4. Ease of Plan Management. Avoid plans that are confusing and overly complicated to maintain and set-up.

These will be important considerations moving forward with your Solo 401k providers as they can have long term impacts on your retirement plan.