A good way to save for retirement is the Solo 401k and especially now with the stock market close to historic lows. This is a retirement plan that you can use if you are a self employed business owner with you as the only employee (spouse does not count). In 2008 – the maximum you can contribute is $46,000. This amount goes up in 2009 to $49,000. Essentially the Solo 401k consists of two parts. A salary deferral and a profit contribution. Self employed business owners can contribute the first $15,500 ($16,500 in 2009) of compensation to the Solo 401k. This is the amount that would have been listed on your W-2.
In addition, a profit sharing contribution of 25% of W-2 compensation can be made if you run an incorporated business and 20% of self employment income if you are a sole proprietorship. The maximum contribution for 2008 is $46000 and $51,000 if your age is above 50 in 2008.
The bottom line is that if you are in a job where there is an option to get paid Corp. to Corp., consider setting up your own company and billing out your services. Right now the stock markets are depressed. And this is a great time to get into a Solo 401k and get your retirement account rolling. $46,000 is a whopping savings any way you slice it.
Etrade.com is one of the companies that gives you the ability to manage your own Solo 401k – which I think is great considering that money managers on the whole have little or no credibility today.