While many corporate-employed US workers rely on employer sponsored 401(K)s to save for retirement, freelancers, temporary gig workers, entrepreneurs, and self-employed people have the great option of investing in an “individual” or “solo” 401(k), according to The Wall Street Journal.
Financial advisers say that there are certain distinct advantages to having a solo 401(k) over an employer sponsored 401(k). As a self-employed person or the owner of a business, a solo 401(k) allows one to make contributions to the fund as both an employer and employee.
This means they can put away large sums that dramatically reduce income taxes. After being created by Congress in 2001, solo 401(k)s have been slow to get the respect and use that they deserve.
“You’d be surprised how many people don’t know about solo 401(k)s, especially accountants,” says Sean Williams, wealth adviser with Sojourn Wealth Advisory in Timonium, Md.
Solos K’s, as some call them, allow for virtually unlimited options to invest in and allow participants to decide between making traditional tax-deductible contributions or after-tax Roth contributions depending on their situation.
Solo K’s also have very high contribution limits which allow you to invest in great amounts.