A sophisticated retirement savings plan like a 401(k), which most of corporate America enjoys, has long been something the independent bar owner could only dream of. Today, it may just be possible.
**By William J. Lynott**
Knowing that a healthy portion of Bar Business readers are, in fact, independent business owners and operators, there is a good chance this month’s financial article can effect your long term outlook. Many bar owners are often its lone employee as well, or sometimes they have a spouse on staff. If that is the case, this new information about retirement planning will really hit home.
In its original form, the 401(k) retirement plan was only for employees of corporations. No more. Now, business owners and professionals operating as sole proprietorships, self-employed or partnerships may open a 401(k)—provided the business has no employees other than owner and spouse.
If your business falls into that category, this is important news for you. The so-called individual or solo 401(k) means that you may shelter thousands more dollars per year than in other kinds of non-corporate retirement accounts.
Congress authorized the solo 401(k) in 2001 to become effective in 2002. Surprisingly, many eligible workers have yet to take advantage of it. The solo 401(k) not only allows you to shelter much higher amounts of income from current taxes, it also allows you to invest the money in your account in a wider range of investment alternatives, including real estate. You may even borrow money from your 401(k) without a penalty.
“The solo 401(k) is a gift to the self-employed from Congress. This is the greatest invention since sliced bread. I’m not kidding,” says Eva Rosenberg, enrolled agent, sole proprietor, and publisher of the Web site www.TaxMama.com.
