The Top Three Reasons Why a Small Business Owner Should Consider a Solo 401k

Author: Chad W. Schiel | February 14, 2020 | 0 Comments | 25 View(s)
1. Consider lowering your end of the year tax liability. Unlike Traditional or Roth IRA’s which only allow you to contribute a maximum of $6,500 depending on your age, Solo 401k plans can allow you to invest up to $62,000 depending on your income and age. This is something that you should talk with your CPA and Financial Advisor about, because it is a wonderful way of reducing your tax liability while working to build long term wealth.

2. Gives you more cash flow liquidity options before the retirement age of 59½. Let’s face it; sometimes as small business owners we have really great months and really slow ones. Cash flow and keeping the company lights on is something that is top-of-mind for all small business owners, but this shouldn’t prevent you from also saving and investing for retirement. Solo 401k plans allow business owners to borrow up to $50,000 or 50% of the account balance from their retirement account without penalty or consequence. The balance borrowed is issued to you with an interest rate that is far lower than other forms of credit, or small business loans. In more ways than one, you can become your businesses lending institution during periods of slow cash flow and times of uncertainty. Think about how that could help with liquidity during times of a nationwide credit crunch like the ones we have seen in the past! Best of all, your contribution balance stays invested and growing as long as you make payments back to the borrowed amount.

3. As the business owner, you make the choice when you pay the taxes. Now or Later? No one likes paying more in taxes than they have to. Unlike some retirement accounts, Solo 401k account allow you to make the decision pertaining to when you pay your taxes on the amount invested. You can pay your taxes now and invest using a Roth IRA strategy, meaning you never pay taxes again on balance of the account. Or, you can invest in a tax deferred account, allowing you to take advantage of tax savings now in your current tax year. Speak with your CPA and me before making a decision.

When you’re ready to talk about a Solo 401k or similar retirement plan, I encourage you to contact me. As an independent financial advisor with no corporate ties or sales quotas, I will take the time to educate you on your personal options. My customer service is impeccable as you will come to find during our relationship. It’s your money; make sure it’s at the right place!

About the Author: Chad Schiel is an independent financial planner in San Juan Capistrano. You can read his full story that was featured in the OC Register by visiting

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