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Financial insights: Can you get a 401(k) without an employer?

Written by Eric Ebbert CFP®, MBA

On September 3, 2021

The 401(k) retirement account. It is a lot like Coca-Cola. It has wide recognition, and many people even use 401(k) as a synonym for all retirement plans, like they say “Coke” for most types of soda. However, many people think that you can only get a 401(k) if you are employed with a traditional company. 

As a result, many self-employed people think they can’t get a 401(k) because they do not have a traditional employer. Employees of start-ups and small businesses that do not offer 401(k)s may also think they cannot get this type of retirement account. However, all these people are mistaken. There is a way you can get a 401(k) without an employer, and a CERTIFIED FINANCIAL PLANNER™ can help you learn how. 

How can you get a 401(k) without an employer?

There are many myths and misconceptions about retirement, and one of them is that you cannot get a 401(k) without an employer. Yet a solo 401(k) plan allows you to do exactly that. 

A solo 401(k) plan is exactly what it sounds like: a 401(k) plan where you are the only participant. That means you can be both the employee and the employer on the account, which can offer several benefits. One of the biggest benefits is that you can set aside more money annually. Why? You are both the contributor and the employee match. Let us look at an example of how this might work. 

Let us say that you make $100,000 per year, and you plan to contribute 8% of your salary toward your solo 401(k). That is an annual contribution of $8,000. To that, you can add a match of up to 20% of your net earnings if you are self-employed. Are you a business owner? If you are, you could add an up to 25% match. Both of these are much higher than the 3% to 6% match that most traditional companies offer. 

A CFP® can advise you about how to set up a solo 401(k). These financial pros can also help you find other effective retirement options like traditional or Roth IRAs.

Talk to a ProVise CFP® professional about your retirement planning

At ProVise Management Group, a CERTIFIED FINANCIAL PLANNER™ on our experienced team can get to know you and your current financial circumstances, goals, risk tolerance and personal values. As a result, they can help you develop a plan that works effectively for you. We can also create a written plan for you at a fiduciary standard of care. All our written plans come with an unconditional money-back guarantee. If you are unhappy with your written plan, you can return it to us, and we will refund 100% of the fee paid.

Are you ready to talk to a professional about 401(k)s and other retirement planning options? Contact ProVise today to schedule a complimentary consultation.

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