Have you heard of a Self 401(k)?
The Self 401(k) comes in both a traditional and Roth version, just like IRAs. With the traditional individual 401(k), you put away money on a pretax basis and it grows tax-deferred. These plans allow you to put away much more pre-tax money.
An Self 401(k) allows you to save for retirement both as an employer and an employee, often enabling you to contribute more than would be possible with other retirement plans.
Here’s how: As an employee, you can contribute up to $16,500. As the employer, you can contribute an additional 25% of compensation, up to a maximum of $49,000, including your employee contribution.
These contributions are discretionary, so you can contribute the maximum in years when you have done well and little or nothing during leaner times. If you and your spouse are both in the plan and enjoy an excellent year, you could save a total of $98,000. And if you are both 50 or older and are therefore eligible for the catch-up contribution option, you could save an additional $5,500 each, thereby bringing the total contribution that year to $109,000.
If you are self employed, you might want to consider this option. Before moving forward with this or any other retirement plans, consult your tax and/or financial representative.