401(k) for self employed

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Are you a freelancer or an independent consultant looking for a way to stash money in a retirement plan? I’m Barbara Whelehan with the Bankrate.com Personal Finance Minute.

If you work for yourself, then it’s up to you to plan for your retirement security. And there’s a way you can do that – by opening a solo 401(k) plan.

A solo 401(k) allows you to invest up to $50,000 a year – or $5,500 more if you’re 50 or older.

How can that be, if in a regular 401(k) plan, your contribution cap is $17,000, or $22,500 if you’re 50 or older? Well, not many people know this, but your employer can contribute more than the usual matching contributions that most businesses offer their workers. As much as $50,000 can go in a regular 401(k), too, but the bulk of those contributions would have to come from the employer, not the worker.

When you work for yourself, you’re both the employer and the employee, so you can be generous with your retirement plan.

For more on this and other personal finance information, visit Bankrate.com. I’m Barbara Whelehan.

Written by
Barbara Whelehan
Contributing writer
Barbara Whelehan is a contributing writer for Bankrate. Barbara writes about a range of subjects, including homebuying, real estate, retirement, taxes and banking.