In this article written for the Advisor Advocate, financial software firm Ubiquity discusses the benefits your clients who are self-employed entrepreneurs can realize by establishing a well-designed retirement savings plan.
Are Entrepreneurs Leaving Money on the Table?
Today, many owners of startup and smaller companies with a single employee either don’t have a retirement savings plan in place, or the plan they have falls far short of meeting their most important financial objectives:
• Reducing the entrepreneur’s tax liability
• Maximizing the entrepreneur’s potential for building wealth
• Providing access to credit to help fund their company’s growth
As a result, many entrepreneurs could be leaving thousands of dollars a year on the table. Essentially, they are sending their hard-earned pay to Uncle Sam rather than boosting their own long-term financial well-being.
Reducing Tax Liability
A Single(k) account, also known as a Solo 401(k), is an online 401(k) plan designed especially for business owners of single-employee companies and their immediate family members. It offers both employer and employee contributions. For 2016, entrepreneurs with a Single(k) account can defer up to $53,000 ($59,000 if they’re 50 or older). For example, an entrepreneur who is at least, and in the 25% federal tax bracket and a state tax bracket of 5%, would experience 2016 tax savings of $17,700. Instead of being paid out in taxes, this money can go directly toward establishing a retirement nest egg for the entrepreneur, and it may be deductible as a business expense.
Maximizing the Potential for Building Wealth
A Single(k) account can be invested in any number of financial instruments such as stocks, bonds, mutual funds and exchange-traded funds (ETFs), based on the goals of the entrepreneur and the comfort with investment risk.
[H2] Access to Credit
Entrepreneurs should exercise caution when they consider borrowing against their retirement accounts. However, such a move might make sense in the context of growing a business. Investments made now can have big payoffs later in the early stages of your company’s growth.
The Ubiquity Single(k)
The Ubiquity Single(k) is just one example of an online employee retirement savings plan that makes it possible for self-employed business owners to set aside tax-deferred money for themselves and their employees with wealth-building benefits. The Ubiquity Single(k) can provide the maximum amount of tax deferral possible, an array of investment management choices and the ability to borrow against the account’s balance.
Of course, all investments carry risk, so every entrepreneur needs to be diligent about understanding investments and paying close attention to the account’s performance and costs.
Join a Webinar to Learn More
To learn more about how the Ubiquity Single(k) might benefit your entrepreneur clients, you are invited to register* for Ubiquity’s webinar "Meet Single(k): Retirement Security For The Self-Employed Client" on Wednesday, Nov. 16 at 4 p.m. ET.