More people are going the self-employed route in terms of a job. There are a lot of pros and cons in being self-employed. The big question here, though, is how a self-employed worker will be able to save enough money for retirement.
Fear not self-employed workers. Because of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA of 2001), you don’t need to worry about your retirement future. The EGTRRA of 2001 did not create a new type of retirement plan but instead changed for the better existing rules that govern 401k plans. Because of these changes, small businesses have also increased the solo 401k contribution limits.
The total limit of a solo 401k this year for 50-year olds and above is $50,000 or $55,500. The employee salary deferral contribution and an employer profit sharing contribution are the two parts that make up this total contribution. At the end of the day, this all means that self-employed workers will be able to attain large retirement savings once they hit that age where they can relax as a Quinquagenarian.
However, the only constant things in life are death and taxes. There is no real assurance that higher contribution opportunities will also mean that the current large retirement savings will be enough to suffice living in retirement age. Even if you have solo 401k contribution limits, that little tricky bugger called inflation can bite you back when you’re least expecting it. There is also the current state of affairs all over the world that can affect future markets and commodities. Even if there is a bright future ahead of scientific development, cultural advancements and humanitarian efforts in making human beings become more amicable to each other is looking pretty bleak.
What you can do is to properly prepare to the best of your abilities. You can also approach financial firms that can provide their input on how to manage your wealth and make it grow while you are not yet of retirement age. Take into consideration how solo 401k contribution limits can be controlled. Since you have “check book control”, you can make the decisions on how to use your solo 401k funds for investments.
At the end of the day, and while you are still of working age and self-employed, setting aside a sizable nest comparable to your solo 401k will be of great value. Make your future bright and stable by consulting with a variety of financial wizards.