Retirement Options for Uber Drivers: Start Now!
You are driving day and night, making good money and NO time to think about how to save for retirement.
I can give you a lift and explain you how to start now.
The SEP IRA and Solo 401k are the two most popular retirement plans for self-employed individuals such as Uber Drivers and small business owners, due to their flexibility and high contribution limits.
While Solo 401k plans have higher administrative responsibilities than a SEP, they may allow a larger annual contribution at identical income levels, due to the way the annual contribution is calculated. IRS regulations do not permit borrowing against a SEP IRA, but a Solo 401k loan of up to half of the account value – with a $50,000 cap – is possible.
- Allowance Limit: 2016 limit is $53,000.
- Advantages: Simple setup, with low administrative charges and responsibilities.
- Disadvantages: A Solo 401k may allow a higher contribution and tax deduction, and it provides the option of a $6,000 catch-up contribution for those 50 years of age and older.
A SEP IRA is perfect for small businesses such as Uber Drivers, and can be established by any company owner. As with many other plans, you have until the tax-filing due date of the company, including extensions, to fund the SEP IRA. You aren’t required to contribute to the plan every year – an attractive feature for businesses that have earnings that vary a lot from one year to the next. This provides business owners with the flexibility to reduce or forego contributions in years when profits are below expectations.
- Contribution Limit: 2016 limit is $53,000 ($59,000 if age 50+, thanks to a catch-up provision).
- Advantages: Possibly higher retirement contribution limits at identical income levels. Loans are permitted of up to 50% of the total value, with a $50,000 maximum.
- Disadvantages: Possibly greater administrative fees and responsibilities.
Self-employed workers who qualify for the Solo 401k receive the same tax benefits as those with a traditional 401k. Business owners who wish to contribute more than the maximum allowed by a SEP IRA may benefit from establishing a Solo 401k.
The 401(k) has a loan option, for instance. And with the SEP, “the minute you hire an employee, you must contribute the same amount of money to that employee’s SEP as you’re paying into your own.
SEP-IRAs offer flexibility if your small business or sole proprietorship grows to a point where you add employees. You don’t immediately have to start profit sharing to any new employees. SEP-IRA’s only requires you to make profit sharing contributions to eligible employees who have worked full time for you over the last 3 out of 5 years. If you have part time employees who work less than 1000 hours, you don’t have to include them in the plan. Individual 401k’s do not allow any plan participation for employees unless they are a spouse. Spouses can participate in both type of plans.
Both plans can offer a great way for you to save for retirement and to realize some tax savings in the process. Whether you go this route or with some other option I urge to start saving for your retirement today.
Contact us if you have any questions at firstname.lastname@example.org
Call us at 716 565 1300 or 813 964 7100, we will be happy to answer all your questions or set up a Retirement Savinsg for YOU!
At Mintco Financial we give you a LIFT! 🙂