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As more women work “side hustles” outside of their regular employment (e.g., Uber, Postmates, Task Rabbit, etc.), there is an opportunity for them to establish their own Solo 401(k) plan, defer taxable income, and save for retirement.

A Solo 401(k) plan consists of an employer contribution and an employee contribution. This type of retirement savings plan enables a self-employed person to take advantage of tax deductible contributions as the employer, pre-tax and/or Roth contributions as the employee, and tax-deferred growth potential on contributions.

If a person is already making the maximum 401(k) contributions to her regular employer’s plan, she will be limited to contributing only the “employer’s portion” of the Solo 401(k) plan, up to 20% of the net profits. However, we believe this is still valuable and worth doing because collectively she is amplifying her retirement savings.

To be eligible, a person needs to be self-employed (i.e., reporting income on Form 1040 Schedule C) without full-time employees (other than a spouse or a business partner). A Solo 401(k) plan must be established prior to December 31st and funded by April 15th or October 15th if on extension.

For guidance in choosing and designing the right retirement plan to fit your goals, allocating the underlying investments, and determining the appropriate amount to save, consult with your financial advisor.

About Savant Wealth Management

Savant Wealth Management is a leading independent, nationally recognized, fee-only firm serving clients for over 30 years with more than $7 billion in assets under management. As a trusted advisor, Savant Wealth Management offers investment management, financial planning, retirement plan and family office services to financially established individuals and institutions. Savant also offers corporate accounting, tax preparation, payroll and consulting through its affiliate, Savant Tax & Consulting.

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