I was recently featured on Woman-prenista about the importance of paying yourself first! I discuss the various ways for small business owners to build up their retirement funds.
Pay Yourself First!
As a woman business owner, you are juggling many priorities. You may focus on building wealth in your business, and neglect building wealth outside of your business. One of the best ways to build wealth while lowering your taxes is to contribute to a retirement plan for small businesses. Here is an overview of three popular plans for you to consider. It is 2019, time to start Paying Yourself First!
1) SEP IRA
In 2019, you can contribute up to 25% of your net business earnings (your earnings minus your business operating expenses, SEP contribution, and half of your self-employment taxes) up to a maximum of $56,000.
If you have employees, you'll need to make the same percentage contributions to your employees' accounts as you do your own. This means that if you choose to set aside 15% of your earnings in your own SEP, you'll need to contribute 15% of each of your employee's earnings to his or her SEP.
2) SIMPLE IRA
Like the SEP, there are requirements to fund your employees' accounts with a SIMPLE IRA, but they aren't as rigid. For 2019 the SIMPLE IRA has an annual contribution limit of $13,000 if you're under 50, or $16,000 if you're 50 or older.
As a business owner, you must match your employees' contributions to their accounts directly up to a maximum of 3% of their compensation or contribute a fixed 2% of their compensation to their accounts.
3) Solo 401(k)
For 2019, a solo business owner can contribute up to 25% of self-employment income (your income minus your business expenses, plan contribution, and half of your self-employment taxes) for a maximum of $56,000 if you're under 50, or $62,000 if you're 50 or older.