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Self-Employed Lives Matter!

In 1978 our tax code was amended to allow the creation of a tax-deferred savings vehicle for employees. It was defined under section 401(k) of the Internal Revenue Code, and quickly became one of the best known employee benefits. Known as the 401(k) plan, it was great for individual investors because tax-deferred growth was a huge benefit over the long haul, was great for employers because it allowed more flexibility than pension plans, and (I'd say) it was also great for the economy as well. Massive employer matched investments fueled a great stock market bull. It was a win-win all around!

There were, however, some drawbacks. The plans were subject to ERISA rules, which defined specifically how the plans could and could not be implemented along with contribution limits and other administrative details. Discrimination between one employee and another was absolutely not allowed, which is a good thing. One of the rules that many didn't like was that self-employed people had no access to this powerful retirement savings vehicle.

In 2001 that changed with the Economic Growth and Tax Relief Reconciliation Act (EGTRRA), and the personal, or Solo 401(k) was born. Now the self-employed worker can take advantage of this powerful savings vehicle too.

Self-Employed Lives Matter!

In 1978 our tax code was amended to allow the creation of a tax-deferred savings vehicle for employees. It was defined under section 401(k) of the Internal Revenue Code, and quickly became one of the best known employee benefits. Known as the 401(k) plan, it was great for individual investors because tax-deferred growth was a huge benefit over the long haul, was great for employers because it allowed more flexibility than pension plans, and (I'd say) it was also great for the economy as well. Massive employer matched investments fueled a great stock market bull. It was a win-win all around!

There were, however, some drawbacks. The plans were subject to ERISA rules, which defined specifically how the plans could and could not be implemented along with contribution limits and other administrative details. Discrimination between one employee and another was absolutely not allowed, which is a good thing. One of the rules that many didn't like was that self-employed people had no access to this powerful retirement savings vehicle.

In 2001 that changed with the Economic Growth and Tax Relief Reconciliation Act (EGTRRA), and the personal, or Solo 401(k) was born. Now the self-employed worker can take advantage of this powerful savings vehicle too.

The Power of Tax-Deferral

When it comes to growing assets for retirement, especially in today's volatile economic environment, you want to take advantage of every break you can get. One of these breaks is through the use of a tax-deferred vehicle, such as a 401-k, IRA, or 403-b plans, etc. How do these plans work? Quite simply, any growth inside them is sheltered from taxation in the accumulation phase. You don't pay the taxes until you begin to take the money out and spend it. This becomes a huge advantage over time.

For example, let's look at a person, age 45 who has $100,00 in a 401-k. She's in a 25% tax bracket. Let's assume this person contributes nothing else for 20 years, and that she averages an 8% return over that same 20 year period. At age 65, in a normal non-tax-deferred account that money would have grown to over $306,000.

But since she was in a 401-k, all of her earnings continued to grow without being taxed. Now the value is well over $466,000, an increase of $145,000. As tax strategies go, this is a good one.

What's the downside to using these tax-deferred vehicles? There are limits as to how much you can contribute to them each year. So what's a person with a very healthy investment budget to do?

The Power of Tax-Deferral

When it comes to growing assets for retirement, especially in today's volatile economic environment, you want to take advantage of every break you can get. One of these breaks is through the use of a tax-deferred vehicle, such as a 401-k, IRA, or 403-b plans, etc. How do these plans work? Quite simply, any growth inside them is sheltered from taxation in the accumulation phase. You don't pay the taxes until you begin to take the money out and spend it. This becomes a huge advantage over time.

For example, let's look at a person, age 45 who has $100,00 in a 401-k. She's in a 25% tax bracket. Let's assume this person contributes nothing else for 20 years, and that she averages an 8% return over that same 20 year period. At age 65, in a normal non-tax-deferred account that money would have grown to over $306,000.

But since she was in a 401-k, all of her earnings continued to grow without being taxed. Now the value is well over $466,000, an increase of $145,000. As tax strategies go, this is a good one.

What's the downside to using these tax-deferred vehicles? There are limits as to how much you can contribute to them each year. So what's a person with a very healthy investment budget to do?

Self-Employed Lives Matter!

In 1978 our tax code was amended to allow the creation of a tax-deferred savings vehicle for employees. It was defined under section 401(k) of the Internal Revenue Code, and quickly became one of the best known employee benefits. Known as the 401(k) plan, it was great for individual investors because tax-deferred growth was a huge benefit over the long haul, was great for employers because it allowed more flexibility than pension plans, and (I'd say) it was also great for the economy as well. Massive employer matched investments fueled a great stock market bull. It was a win-win all around!

There were, however, some drawbacks. The plans were subject to ERISA rules, which defined specifically how the plans could and could not be implemented along with contribution limits and other administrative details. Discrimination between one employee and another was absolutely not allowed, which is a good thing. One of the rules that many didn't like was that self-employed people had no access to this powerful retirement savings vehicle.

In 2001 that changed with the Economic Growth and Tax Relief Reconciliation Act (EGTRRA), and the personal, or Solo 401(k) was born. Now the self-employed worker can take advantage of this powerful savings vehicle too.

The Power of Tax-Deferral

When it comes to growing assets for retirement, especially in today's volatile economic environment, you want to take advantage of every break you can get. One of these breaks is through the use of a tax-deferred vehicle, such as a 401-k, IRA, or 403-b plans, etc. How do these plans work? Quite simply, any growth inside them is sheltered from taxation in the accumulation phase. You don't pay the taxes until you begin to take the money out and spend it. This becomes a huge advantage over time.

For example, let's look at a person, age 45 who has $100,00 in a 401-k. She's in a 25% tax bracket. Let's assume this person contributes nothing else for 20 years, and that she averages an 8% return over that same 20 year period. At age 65, in a normal non-tax-deferred account that money would have grown to over $306,000.

But since she was in a 401-k, all of her earnings continued to grow without being taxed. Now the value is well over $466,000, an increase of $145,000. As tax strategies go, this is a good one.

What's the downside to using these tax-deferred vehicles? There are limits as to how much you can contribute to them each year. So what's a person with a very healthy investment budget to do?

Self-Employed Lives Matter!

In 1978 our tax code was amended to allow the creation of a tax-deferred savings vehicle for employees. It was defined under section 401(k) of the Internal Revenue Code, and quickly became one of the best known employee benefits. Known as the 401(k) plan, it was great for individual investors because tax-deferred growth was a huge benefit over the long haul, was great for employers because it allowed more flexibility than pension plans, and (I'd say) it was also great for the economy as well. Massive employer matched investments fueled a great stock market bull. It was a win-win all around!

There were, however, some drawbacks. The plans were subject to ERISA rules, which defined specifically how the plans could and could not be implemented along with contribution limits and other administrative details. Discrimination between one employee and another was absolutely not allowed, which is a good thing. One of the rules that many didn't like was that self-employed people had no access to this powerful retirement savings vehicle.

In 2001 that changed with the Economic Growth and Tax Relief Reconciliation Act (EGTRRA), and the personal, or Solo 401(k) was born. Now the self-employed worker can take advantage of this powerful savings vehicle too.

The Power of Tax-Deferral

When it comes to growing assets for retirement, especially in today's volatile economic environment, you want to take advantage of every break you can get. One of these breaks is through the use of a tax-deferred vehicle, such as a 401-k, IRA, or 403-b plans, etc. How do these plans work? Quite simply, any growth inside them is sheltered from taxation in the accumulation phase. You don't pay the taxes until you begin to take the money out and spend it. This becomes a huge advantage over time.

For example, let's look at a person, age 45 who has $100,00 in a 401-k. She's in a 25% tax bracket. Let's assume this person contributes nothing else for 20 years, and that she averages an 8% return over that same 20 year period. At age 65, in a normal non-tax-deferred account that money would have grown to over $306,000.

But since she was in a 401-k, all of her earnings continued to grow without being taxed. Now the value is well over $466,000, an increase of $145,000. As tax strategies go, this is a good one.

What's the downside to using these tax-deferred vehicles? There are limits as to how much you can contribute to them each year. So what's a person with a very healthy investment budget to do?

Self-Employed Lives Matter!

In 1978 our tax code was amended to allow the creation of a tax-deferred savings vehicle for employees. It was defined under section 401(k) of the Internal Revenue Code, and quickly became one of the best known employee benefits. Known as the 401(k) plan, it was great for individual investors because tax-deferred growth was a huge benefit over the long haul, was great for employers because it allowed more flexibility than pension plans, and (I'd say) it was also great for the economy as well. Massive employer matched investments fueled a great stock market bull. It was a win-win all around!

There were, however, some drawbacks. The plans were subject to ERISA rules, which defined specifically how the plans could and could not be implemented along with contribution limits and other administrative details. Discrimination between one employee and another was absolutely not allowed, which is a good thing. One of the rules that many didn't like was that self-employed people had no access to this powerful retirement savings vehicle.

In 2001 that changed with the Economic Growth and Tax Relief Reconciliation Act (EGTRRA), and the personal, or Solo 401(k) was born. Now the self-employed worker can take advantage of this powerful savings vehicle too.

The Power of Tax-Deferral

When it comes to growing assets for retirement, especially in today's volatile economic environment, you want to take advantage of every break you can get. One of these breaks is through the use of a tax-deferred vehicle, such as a 401-k, IRA, or 403-b plans, etc. How do these plans work? Quite simply, any growth inside them is sheltered from taxation in the accumulation phase. You don't pay the taxes until you begin to take the money out and spend it. This becomes a huge advantage over time.

For example, let's look at a person, age 45 who has $100,00 in a 401-k. She's in a 25% tax bracket. Let's assume this person contributes nothing else for 20 years, and that she averages an 8% return over that same 20 year period. At age 65, in a normal non-tax-deferred account that money would have grown to over $306,000.

But since she was in a 401-k, all of her earnings continued to grow without being taxed. Now the value is well over $466,000, an increase of $145,000. As tax strategies go, this is a good one.

What's the downside to using these tax-deferred vehicles? There are limits as to how much you can contribute to them each year. So what's a person with a very healthy investment budget to do?