Self Employed Retirement Plans

[hgjjgkj]

Quick Question I am trying to udnerstand based on a few articles I read. If you are employed as a freelance contractor, and not allowed to participate in a 401k, and you have no employees, it looks like a Solo 401k is an option. Based on this NerdWallet Articlehttps://www.nerdwallet.com/blog/investing/retirement-plans-self-employed/, a Solo 401k allows Pre Tax Contributions of up to 55K per year.

Can this be correct? That would be some pretty big tax savings if your salary is greater than 100k. I am trying to do some math to figure out the total take home pay difference if I switch from a W2 employee to a contractor. I think there are also FICA implications but not 100% sure.

[bacchi]

Quick Question I am trying to udnerstand based on a few articles I read. If you are employed as a freelance contractor, and not allowed to participate in a 401k, and you have no employees, it looks like a Solo 401k is an option. Based on this NerdWallet Articlehttps://www.nerdwallet.com/blog/investing/retirement-plans-self-employed/, a Solo 401k allows Pre Tax Contributions of up to 55K per year.

Can this be correct? That would be some pretty big tax savings if your salary is greater than 100k. I am trying to do some math to figure out the total take home pay difference if I switch from a W2 employee to a contractor. I think there are also FICA implications but not 100% sure.

Yes, the maximum is $55k if you make enough money. It's $18.5k + 20/25% of your profits.

You would end up paying both sides of FICA (known as "self employment" tax by the IRS*). That's 15.3% but notice that you already pay half in your W2 paychecks (the employer pays the other half and since you're both the employer and employee as a contractor...).



* https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes