If you’re a lean entrepreneur, it could cost you millions to NOT use a Solo 401k. Here are 3 ways you can build your wealth bigger and faster with the help of a Solo 401k:
#1: Invest More of Your Own Money
With a Solo 401k, you can shelter up to $118,000 of income PER YEAR into a Solo 401k. If your effective tax rate was 25%, that would mean an extra $29,500 going into investments for your future… every single year. That’s over 1000% more tax savings than an IRA can give you.
It pays to be an entrepreneur!
How much, you ask? Over a 25 year period, with 7% returns, you could have an extra $2,156,565 thanks to this one move:
Same income, same investment returns… just add the Solo 401k and huge tax savings go into investments for YOU… and you end up with $1,425,526 more money.
#2: Keep More of Your Real Estate Profits
A Self-Directed IRA can invest into real estate, but in some cases VERY heavy double taxation can occur on investment properties that have mortgage financing. In that case, a 39% tax is applied on real estate profits each year and you still have to pay income taxes later when you distribute out of your IRA! The Solo 401k is 100% exempt from this double taxation on mortgage-financed real property.
#3: Use Roth
Up to $48,000 of your annual contribution into your Solo 401k can be designated as Roth, making it tax-free—you won’t have to pay taxes when withdrawing Roth money later to spend. Plus you can convert your existing retirement funds to Roth as well, all inside your Solo 401k. This is even available to you if you make “too much money” to qualify for a Roth IRA! Certain investments, especially those available to accredited investors, may be particularly fitting for ROTH status, and now finally with a Solo 401k, accredited investors can partake in ROTH—a very powerful move indeed.
I help successful entrepreneurs translate their success into meaningful wealth so they can live larger, retire sooner, give more, and leave a legacy. If you’d like to improve your wealth building, reach out to me here and let’s chat to find out if there’s a fit.
– Jeff Nabers