The i401k (also known as the Individual 401K or Solo 401K) is the 401K plan for Independent Contractors. Just as a traditional 401K offers myriad benefits for employees like tax deferred retirement savings and the benefit of lowering your tax bill, the i401K plan was set up to offer the same benefits for independent contractors.
Tax Savings for Independent Contractors
Since I’m an independent contractor, the i401K allows me to contribute in two ways:
- as an employee, making salary-deferred contributions of up to $18,500 as of 2018
- as an employer (because I own a sole proprietorship), making profit-sharing contributions of up to $55,000 (including the $18,500 salary deferral) a year, tax free, for retirement. There are a couple of caveats to this, so read on for more details! Continue reading “The i401K: Your Best Friend as An Independent Contractor”