Hey Ally! (As you know) You have to be making non-W2 income for three years before contributing to a SEP if you’re a solo business owner. Would it make sense to contribute to a Solo 401k for the first three years of business and deal with the messier paperwork in order not to miss out on tax-deferred retirement savings? Would you recommend that people who are hoping to strike out on their own make some freelance income in their W2 years so they can hit the ground running with a SEP? Thanks!
You can set up the plan that way if you like, if you want to require your employees to work for three years before allowing them to contribute to the SEP. But for solo operators, the code says that self-employed individuals are able to allow less restrictive requirements, making it the easiest option to establish. https://www.irs.gov/retirement-plans/plan-sponsor/simplified-employee-pension-plan-sep
Yes! Also want to give a shout-out to the SIMPLE plan, which is similar, but for me as a craft artist (and low income- a huge portion of my spending every year ends up being business expenses) it works better
Hey Ally! (As you know) You have to be making non-W2 income for three years before contributing to a SEP if you’re a solo business owner. Would it make sense to contribute to a Solo 401k for the first three years of business and deal with the messier paperwork in order not to miss out on tax-deferred retirement savings? Would you recommend that people who are hoping to strike out on their own make some freelance income in their W2 years so they can hit the ground running with a SEP? Thanks!
You can set up the plan that way if you like, if you want to require your employees to work for three years before allowing them to contribute to the SEP. But for solo operators, the code says that self-employed individuals are able to allow less restrictive requirements, making it the easiest option to establish. https://www.irs.gov/retirement-plans/plan-sponsor/simplified-employee-pension-plan-sep
Thank you!
This is so helpful! Thank you.
I’m so glad! Love love love the SEP.
Yes! Also want to give a shout-out to the SIMPLE plan, which is similar, but for me as a craft artist (and low income- a huge portion of my spending every year ends up being business expenses) it works better