Many small business owners in our firm ask us questions regarding retirement funds. A deeply held belief in our firm is to invest in yourself. It’s in our tax pillars here.
As a firm believer in investment, naturally, retirement savings comes up.
There are many tax benefits of investing in a 401K, including the ability to invest large sums of money earned from year to year. If you have employee’s it is also a great way to attract and keep investment-minded individuals on your team.
Here are some of the tax benefits of a 401K:
Deferral of taxes on a portion of your income up to $19,500 in 2020 and 2021
Catch-up contributions for those age 50 and over $6,500 in 2021 and 2020
Maximum Deferral paid to a participant’s account cannot exceed the lesser of:
Many small business owners are also interested in Roth 401K for investing. The Roth 401K does not allow for deferred tax treatment but allows for tax-free growth.
Depending on your strategy, either tool would offer you opportunities to save your taxes and prepare for your future.
These are not simple decisions, and executing can feel even more overwhelming. Reaching out to your tax advisor or accountant is so important to help you get this right.
Please reach out if we can ever be of service in helping you work with a financial advisor and make sure you implement the 401K correctly. We want to help you reach your goals, including your retirement goals.