If you are an “experienced” self-employed individual, you are entitled to some tax breaks that younger self-employed folks cannot claim.
Read this article for the scoops.
Keep Making Retirement Account Contributions, and Make Extra “Catch-up” Contributions, Too
Self-employed individuals who are age 50 and older as of the applicable year-end can make additional elective deferral catch-up contributions to certain types of tax-advantaged retirement accounts.
For the 2019 tax year, you can take advantage of this opportunity if you will be 50 or older as of December 31, 2019.
You can make elective deferral catch-up contributions to your self-employed 401(k) plan or to a Savings Incentive Match Plan for Employees (SIMPLE) IRA.
You can also make catch-up contributions to a traditional or Roth IRA.
The maximum catch-up contributions for 2019 are as follows:
Catch-up contributions are above and beyond
the “regular” 2019 elective deferral contribution limit of $19,000 that otherwise applies to a 401(k) plan.
the “regular” 2019 elective deferral contribution limit of $13,000 that otherwise applies to a SIMPLE IRA.
the “regular” 2019 contribution limit of $6,000 that otherwise applies to a traditional or Roth IRA.
How Much Can Those Catch-up Contributions Be Worth?
Good question. You might dismiss catch-up contributions as relatively inconsequential unless we can prove otherwise. Fair enough. Here’s your proof:
401(k) catch-up contributions. Say you turned 50 during 2019 and contributed on January 1, 2019, an extra $6,000 for this year to your self-employed 401(k) account and then did the same for the following 15 years, up to age 65. Here’s how much extra you could accumulate in your 401(k) account by the end of the year you reach age 65, assuming the indicated annual rates of return below:
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