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This past year highlighted small businesses more than any other. The impact from a struggling economy has not gone unnoticed and the support from local shoppers has made the difference between open and closed for many small business owners. If you own a small business, one thing is certain, the responsibility of retirement planning is square on your shoulders.<\/p>\n
Unlike an employee who may have access to a 401(k), you\u2019re on your own so you want to put the right plan in place. First, establish your goals for your retirement savings, then work through the options for how to build your savings.<\/p>\n
Traditional or Roth IRA<\/strong> \u2013 This option is best for anyone just starting out. If you\u2019re leaving a job to start a business, you can also roll your old 401(k) into an IRA. The contribution limit is $6,000 in 2020 and 2021 ($7,000 if age 50 or older). The tax advantage of this option includes either tax deduction on contributions to a traditional IRA or no immediate deduction for Roth IRA, but withdrawals in retirement are tax-free.<\/p>\n Solo 401(k)<\/strong> \u2013 This choice is good for a business owner or self-employed person with no employees (except a spouse, if applicable). The contribution limit is up to $58,000 in 2021 up from $57,000 in 2020 (plus a $6,000 catch-up contribution for those 50 or older) or 100% of earned income, whichever is less. The tax advantage of this choice is that the plan works just like a standard, employer-offered 401(k): You make contributions pre-tax, and distributions after age 59\u00bd are taxed.<\/p>\n