10 Ways To Maximize Retirement Savings On A Solo 401k

Nobody wants to work until they are put into the ground. That’s why retirement savings plans are around, so that when the time comes to enjoy the later years of life, it’s possible to do so. For the sole proprietor, access to a Solo 401k retirement plan helps them do just that.

Here are 10 ways to maximize your retirement savings on a Solo 401k plan:

1. Limit fees

2. Spousal Contributions

3. Front-Load Savings

4. Manage a Wide Investment Portfolio

5. Get a 401k Match

6. Don’t Borrow

7. Increase Savings Rate

8. Maximize Tax Breaks

9. Rollover Old Plans

10. Things Change with Age

This can get really complicated really fast, but the expert guidance at SEPira(k) helps to make it all as easy and stress free as possible with their state-of-the-art secure and flexible platform. With their help and these ten tips, maximizing Solo 401k savings is a breeze. Keep reading to learn more! 

Limit Fees

There’s always going to be fees when it comes to managing finances. It could be an administrative fee, setup fee, or plenty of other fees eating away at the assets. One of the best ways to maximize a Solo 401k’s earnings is to ensure that these fees are limited.

Keep an eye on them and don’t be afraid to ask for clarification on what something is if unsure. It’s also totally acceptable to shop around to find fees that are worthwhile to your unique needs.

Spousal Contributions

While a Solo 401k doesn’t allow for the owner to have any full-time employees, there is an exception for spouses. A spouse can contribute to a Solo 401k in their partner’s name. It’s on average twice what is available in other 401k plans, so it’s definitely worth having a spouse contribute to it too.

Front-Load Savings

The best way to make sure that money grows within a Solo 401k is to get in on the payments as soon as possible. Up to 100% of the income for the business associated with the plan can be invested in it, so capping out early can help if and when costs go up down the line.

Just be mindful of the fact that this can limit other opportunities depending on your specific plan details.

Manage a Wide Investment Portfolio

Something a Solo 401k has on other types of retirement plans is a much wider investment net. Depending on the provider, this can be pretty much limitless. Having a wide portfolio increases opportunities for money to grow, while also serving as a net if things don’t go as planned. 

For example, SEPira(k) allows clients to choose investments from common to unconventional assets such as:

• Mutual Funds

• Stocks

• Bonds

• Real Estate (both residential and commercial)

• Tax Liens

• Private Placements

• Precious Metals

• Energy Investments

• Equipment Leasing

• Foreign Currency

Additionally, Solo 401k plans also tend to allow investing in life insurance. So that kills two birds with one stone right there!

Get a 401k Match

It’s relatively common in regular 401k plans to have a match system up to a certain amount. That means that anything put into the plan gets matched by the employer, or sometimes even the provider. Sometimes it’s a perfect 1:1 match, and sometimes it’s a certain percentage. 

Either way, having that means more money goes into the fund than what was actually personally put into it. It’s part of why 401k plans are so popular over generic savings accounts when it comes to retirement investments.

Don’t Borrow

The point of leaving money in a 401k is so that it will grow and make it so one day you don’t have to work anymore. Borrowing money from the plan, even if under what will bring about fees, is going to take away from how much can be built upon. Unless absolutely unavoidable, try not to borrow money from the plan and just let it do its thing.

Increase Savings Rate

Basic plans often have a set percentage that they take towards saving. Increasing that number as much as feasible is definitely a way to maximize how much is going into the Solo 401k plan. Just be sure not to overdo it. While it is possible to put every penny into savings, that’s not going to do much good if you can’t afford to live without pulling money back out.

Maximize Tax Breaks

Everyone falls into different tax brackets. Knowing which one you’re in helps to maximize returns and thus what can be stuffed into a Solo 401k.  Some even allow deferment of paying taxes for what was put into the plan, so it’s definitely worth it. 

Also, for some people, doing itemized deductions helps to maximize the return. This is often the case for sole proprietors and freelancers, which is one of the requirements for a Solo 401k. Not only that, but filing and paying taxes multiple times a year can help instead of doing it all at once at the beginning. Just be sure to see what works best for your situation.

Rollover Old Plans

If there was a former 401k plan, definitely rollover that money into the new Solo 401k instead of letting it fade into the void or trying to manage a plan that’s just collecting dust. That doesn’t mean if there’s another 401k from an employer actively getting payments put into it to stop that one. It’s just to remember that old plans can be rolled into new ones so that no money is lost.

Things Change with Age

There are a few things with 401k plans, including Solo plans, as the owner ages. For example, limits will increase after the age of 50. After the age of 72, the IRS requires annual distributions from the 401k plan.

There’s also some plans and providers that will change fees as time goes on. Most have higher starting fees in the first year, and some can be a bit more variable as the plan matures.

Conclusion

It can be really difficult to manage a Solo 401k plan, let alone maximize it. If done wrong, the entire plan can be disqualified and taxed as income by the IRS. Nobody wants that headache while they’re trying to save for their future. Thankfully, there are easy ways to maximize these benefits from limiting fees, to managing a wide investment portfolio, and even down to maximizing tax breaks. There’s also the experts at SEPira(k) who are ready to help with their secure and flexible state-of-the-art platform so that there can be more saving and less stress.