WEBVTT - A Master Class on SEP IRA vs Solo 401ks 0:00:08.420 --> 0:00:13.100 July 12, 2026. Welcome everybody to the Women and Money podcast, 0:00:13.140 --> 0:00:16.700 as well as everybody smart enough to listen. Today is 0:00:16.700 --> 0:00:19.700 Suze School, and you are going to get out your 0:00:19.700 --> 0:00:22.579 Suze notebooks. Do you hear me? And the reason is 0:00:22.579 --> 0:00:26.120 very simple. You are going to want to write down 0:00:26.700 --> 0:00:31.819 everything I am going to tell you today, period. Just 0:00:31.819 --> 0:00:35.778 know that. But before I begin that, what I want 0:00:35.779 --> 0:00:37.479 to say is this. 0:00:38.270 --> 0:00:42.990 The markets are crazy. They're up, they're down. None of 0:00:42.990 --> 0:00:46.599 you are going to own a stock that goes straight 0:00:46.598 --> 0:00:49.830 up in this type of an environment. None of you 0:00:49.830 --> 0:00:52.669 are going to own a stock that goes straight down 0:00:52.668 --> 0:00:54.189 and doesn't return 0:00:54.264 --> 0:00:57.305 to go back up again, if you have listened to 0:00:57.305 --> 0:01:02.294 the kinds of stocks and ETFs that I've been talking about. So, 0:01:02.345 --> 0:01:06.214 don't look at your portfolio every single day and go, 0:01:06.264 --> 0:01:09.144 oh my God, this is down. It's down more. It's 0:01:09.144 --> 0:01:10.223 down even more. 0:01:10.970 --> 0:01:13.949 Listen to me and listen to me closely here. 0:01:14.809 --> 0:01:17.610 You are not to be investing in the stock market, 0:01:17.819 --> 0:01:20.260 unless you have at least five or 10 years or 0:01:20.260 --> 0:01:24.339 longer till you need this money, minimum of five, all right? 0:01:25.260 --> 0:01:29.389 And therefore, what good does it do you for these 0:01:29.389 --> 0:01:32.529 markets to go up and up and up on paper 0:01:33.150 --> 0:01:36.370 because you haven't cashed out yet when you're not going 0:01:36.709 --> 0:01:41.348 to cash out and your dollar cost averaging, which means 0:01:41.349 --> 0:01:44.830 your dollars are buying less shares because of what you're 0:01:44.830 --> 0:01:50.389 buying is more expensive. So when things go down, things 0:01:50.389 --> 0:01:52.190 that you want to own. 0:01:53.110 --> 0:01:56.790 That is the time that you really want to dollar 0:01:56.790 --> 0:02:00.989 cost average once a month, every three months, whatever it 0:02:00.989 --> 0:02:04.150 may be. So this is not the time to freeze. 0:02:04.360 --> 0:02:06.870 This is not the time to sell. This is not 0:02:06.870 --> 0:02:08.470 the time for you to think that you're going to 0:02:08.470 --> 0:02:11.860 outsmart these markets. You will never outsmart these markets. 0:02:12.764 --> 0:02:15.945 These markets will always teach you what you need to know, 0:02:16.024 --> 0:02:20.304 which is what consistency. The sooner you do something, the better. 0:02:20.544 --> 0:02:24.304 The longer you hold, the better, especially if it's a 0:02:24.304 --> 0:02:29.684 good quality ETF and or stock, bond, whatever it may be. 0:02:30.104 --> 0:02:34.645 So just you be consistent in a time when this 0:02:34.645 --> 0:02:39.264 world could not be more inconsistent if it tried. 0:02:39.889 --> 0:02:43.889 So as long as we're still at war, we're out 0:02:43.889 --> 0:02:45.889 of war, we're back in war. 0:02:46.660 --> 0:02:52.179 I'm telling you, nothing will absolutely go straight up or 0:02:52.179 --> 0:02:57.940 straight down. So, just know that, OK? All right, are 0:02:57.940 --> 0:03:01.779 you ready for Suze School to begin? 0:03:02.589 --> 0:03:05.070 Now, a week ago, and I think it was just 0:03:05.070 --> 0:03:08.550 a week ago, I told you that I would do 0:03:08.550 --> 0:03:13.710 a Suze School on the difference between a SEP IRA 0:03:14.350 --> 0:03:19.149 and a solo Roth 401k. So for those of you 0:03:19.149 --> 0:03:20.910 who are self-employed... 0:03:22.089 --> 0:03:26.770 This is for you. You're your own boss, whatever it 0:03:26.770 --> 0:03:31.009 may be. Maybe you're just selling candles on Etsy. Maybe 0:03:31.008 --> 0:03:34.929 you're driving a rideshare on Saturdays, whatever it may be. 0:03:35.460 --> 0:03:39.130 As long as you don't have any employees and you 0:03:39.130 --> 0:03:44.399 have a business, you are essentially self-employed, so you need 0:03:44.399 --> 0:03:45.210 to listen up. 0:03:46.009 --> 0:03:48.710 And you need to listen up to the difference between 0:03:49.289 --> 0:03:54.970 the solo Roth 401k and the SEP IRA. So, it 0:03:54.970 --> 0:03:59.809 is important that you understand the difference, because I'm here 0:03:59.809 --> 0:04:04.270 to tell you, you can save either two times, three times, 0:04:04.490 --> 0:04:09.270 or more, seriously, as much in a solo 401k versus 0:04:09.270 --> 0:04:13.610 a SEP IRA on the exact same income. 0:04:13.970 --> 0:04:17.940 So for those of you who have a SEP IRA, 0:04:18.200 --> 0:04:22.558 you have no employees, you best listen up because in 0:04:22.559 --> 0:04:27.000 most cases you are making a mistake and a solo 0:04:27.000 --> 0:04:34.279 401k would be absolutely the way to go. However, there's 0:04:34.279 --> 0:04:39.089 one other thing you need to listen up and understand. 0:04:39.399 --> 0:04:40.440 I can hear it now. 0:04:40.779 --> 0:04:43.980 I can hear it. A lot of you have already 0:04:43.980 --> 0:04:48.799 heard me say no employees, and you're thinking to yourself, 0:04:49.260 --> 0:04:51.738 but Susie, I have a helper who comes in a 0:04:51.738 --> 0:04:55.739 few hours a week, or my daughter works summers for me. 0:04:56.369 --> 0:05:00.329 And you're trying to get around the rules possibly, but 0:05:00.329 --> 0:05:05.489 you need to understand the definition of an employee, and 0:05:05.488 --> 0:05:10.368 the definition for an employee in these two cases is 0:05:10.369 --> 0:05:16.029 not a full-time employee. What matters is this 0:05:16.660 --> 0:05:20.219 How much they work and how long they have been 0:05:20.220 --> 0:05:24.919 with you and the two plans they measure it completely 0:05:25.178 --> 0:05:27.559 differently so take notes here. 0:05:28.269 --> 0:05:34.359 The solo 401k counts hours. So once someone works 500 0:05:34.359 --> 0:05:38.558 hours a year, listen everybody, that's just 10 hours a 0:05:38.559 --> 0:05:43.320 week for two years running. They're in your plan whether 0:05:43.320 --> 0:05:46.429 you know it or not, and the solo part, the 0:05:46.428 --> 0:05:52.320 solo is over. It's over. You don't qualify anymore for 0:05:52.320 --> 0:05:54.160 a solo 401k. 0:05:55.380 --> 0:06:00.709 Remember, a solo 401k means one person, of course, unless 0:06:00.709 --> 0:06:05.950 the other person is your spouse. So be careful here. 0:06:06.760 --> 0:06:11.380 The SEP IRA does not count hours at all. It 0:06:11.570 --> 0:06:15.730 counts years. Somebody works for you in three of the 0:06:15.730 --> 0:06:20.070 last five years, even just a few hours here and there. 0:06:20.450 --> 0:06:23.238 It is probable that you will owe that person the 0:06:23.238 --> 0:06:28.410 exact same percentage you give yourself. So if you're paying 0:06:28.410 --> 0:06:32.410 yourself 10% of your compensation, you're going to have to 0:06:32.410 --> 0:06:34.390 give it to them as well. 0:06:34.950 --> 0:06:38.519 So, again, an occasional worker here and there, really, you're fine, 0:06:38.950 --> 0:06:45.118 but be careful, because you're a steady part-timer of several years. 0:06:45.470 --> 0:06:49.109 Watch out, cause you're going to owe them money. And 0:06:49.109 --> 0:06:51.609 I just have to give you one warning. All right, everybody, 0:06:51.670 --> 0:06:54.709 I know, I know, cause all of you always try 0:06:54.709 --> 0:06:58.929 to get clever. Do not go calling a real employee, 0:06:59.109 --> 0:07:02.428 a contractor, just to protect your plan. 0:07:03.369 --> 0:07:06.019 That's a trick, everybody. Remember, I always tell you, stand 0:07:06.019 --> 0:07:11.359 in your truth. That trick, if caught, creates IRS problems 0:07:11.359 --> 0:07:14.500 that make all of this really look like a picnic 0:07:14.500 --> 0:07:18.420 for you. So, I just want you to understand when 0:07:18.420 --> 0:07:24.700 I'm saying employees throughout this podcast, exactly what I am 0:07:24.700 --> 0:07:30.489 talking about. OK, are you ready? Let's begin. Here's what 0:07:30.489 --> 0:07:31.529 I want you to do: 0:07:32.380 --> 0:07:34.910 On a piece of paper in front of you and 0:07:34.910 --> 0:07:37.510 you all need to get that out now really if 0:07:37.510 --> 0:07:38.429 you don't have it. 0:07:39.170 --> 0:07:42.500 I want you to draw a picture of two hats, 0:07:43.010 --> 0:07:46.250 two hats. They can just be a square, OK? Just 0:07:46.250 --> 0:07:50.890 think of them as hats, side by side. Under hat 0:07:50.890 --> 0:07:57.390 number one, I want you to put the word worker/employee 0:07:57.570 --> 0:07:58.250 under it. 0:07:59.079 --> 0:08:00.540 Just do that for me for now. 0:08:01.600 --> 0:08:04.529 Under hat number two, I want you to put the 0:08:04.529 --> 0:08:09.890 words boss/employer, just that simple. 0:08:10.670 --> 0:08:13.350 Now, assuming again you work for yourself and you don't 0:08:13.350 --> 0:08:16.839 have any employees, I want you to listen up. 0:08:17.709 --> 0:08:21.950 When you work for yourself, you wear two hats. I 0:08:21.950 --> 0:08:24.470 want you to think about it. You are wearing the 0:08:24.470 --> 0:08:28.339 worker hat, when you are doing the actual work, you're 0:08:28.350 --> 0:08:31.350 designing the logos, you're coaching the clients, driving the car, 0:08:31.429 --> 0:08:32.630 whatever it may be. 0:08:33.530 --> 0:08:37.469 However, when you sign the checks, make all the decisions, 0:08:37.729 --> 0:08:42.530 pay the taxes, you are wearing the boss hat. So 0:08:42.530 --> 0:08:47.030 in reality, you always wear two hats. 0:08:47.710 --> 0:08:52.650 An employer hat and an employee hat. You can think 0:08:52.650 --> 0:08:56.130 of yourself as the worker or the boss, either one, 0:08:56.309 --> 0:09:02.270 but you wear both those hats. Now why do I 0:09:02.270 --> 0:09:08.210 care and why should you care about these hats? Very simple, 0:09:08.909 --> 0:09:13.090 because that is the entire difference between the solo 401k 0:09:13.429 --> 0:09:16.348 and the SEP IRA. 0:09:17.590 --> 0:09:23.510 So, the solo 401k lets both hats contribute. 0:09:24.359 --> 0:09:29.219 The worker hat and the boss hat. The SEP IRA 0:09:29.469 --> 0:09:35.218 only lets one hat contribute, and that is just the 0:09:35.219 --> 0:09:37.429 employer or the boss hat. 0:09:38.440 --> 0:09:43.760 So, two hats are obviously better than one, when it 0:09:43.760 --> 0:09:48.640 comes to contributions, cause you have both sources contributing. 0:09:49.440 --> 0:09:52.200 Do you get that? Think about this. Just put a 0:09:52.200 --> 0:09:57.140 pin in that for one second. Think about the 401k, 403B, 0:09:57.400 --> 0:10:01.710 whatever it may be, as an employee. When you have 0:10:01.710 --> 0:10:03.619 an employer sponsored plan. 0:10:04.739 --> 0:10:11.619 You contribute and your employer contributes. When you have an 0:10:11.619 --> 0:10:16.059 individual IRA only you contribute. 0:10:16.900 --> 0:10:20.659 And if you think about that, you get to contribute 0:10:20.659 --> 0:10:21.239 more 0:10:21.690 --> 0:10:26.449 in a 401k, 403B, TSP, whatever it may be, than 0:10:26.450 --> 0:10:32.270 you do in an individual IRA. The same is true 0:10:32.770 --> 0:10:38.329 for a SEP IRA only you can contribute versus a 0:10:38.330 --> 0:10:44.729 solo 401k where you can contribute as the employee and 0:10:44.729 --> 0:10:48.830 the employer. Does that make sense to you? 0:10:49.630 --> 0:10:56.090 So therefore, let's begin with what is a SEP IRA. 0:10:56.590 --> 0:11:00.820 A SEP IRA, better known just as a SEP, stands 0:11:00.820 --> 0:11:05.789 for Simplified Employee Pension. I want you to notice the 0:11:05.789 --> 0:11:11.619 words Simplified Employee Pension. Why do they call it that? 0:11:11.869 --> 0:11:15.570 Because first of all, everybody, it's simple. It takes maybe 0:11:15.570 --> 0:11:19.150 five minutes to set up. Next. 0:11:19.679 --> 0:11:23.159 Look at the word employee. It is set up for 0:11:23.159 --> 0:11:28.459 the benefit of an employee, and how does an employee benefit? 0:11:28.960 --> 0:11:35.619 They benefit when the boss puts in money for the employee, period. 0:11:35.960 --> 0:11:39.799 The employee cannot put in money. Only the boss can 0:11:39.799 --> 0:11:44.159 put in money. So it is your boss hat when 0:11:44.159 --> 0:11:45.710 you are setting up a SEP 0:11:46.710 --> 0:11:51.599 that contributes. So the question is how much can the 0:11:51.599 --> 0:11:55.919 boss put in. And remember, if you're self-employed and you 0:11:55.919 --> 0:12:00.199 set up a SEP, you are the boss putting in 0:12:00.200 --> 0:12:04.239 money for your own benefit, but only the boss can 0:12:04.239 --> 0:12:04.840 put it in. 0:12:05.799 --> 0:12:10.000 So how much can the boss put in? Write this down, 0:12:10.479 --> 0:12:16.780 20 to 25% of your compensation up to a max 0:12:16.780 --> 0:12:22.700 of $72,000. Now just so you know, to be able 0:12:22.700 --> 0:12:25.619 to hit that mark of $72,000, 0:12:26.309 --> 0:12:31.150 you have to have compensation of anywhere between $288,000 and 0:12:31.150 --> 0:12:35.840 $360,000 a year depending on if you're an S corp 0:12:36.190 --> 0:12:39.309 or a sole proprietor. Just know that that's not a 0:12:39.309 --> 0:12:44.169 big deal, but that's the whole story for the simplified 0:12:44.169 --> 0:12:46.710 employee pension plan, the SEP. 0:12:47.450 --> 0:12:53.929 So after $72,000 is reached in that plan, that's it, 0:12:54.010 --> 0:12:54.929 it closes. 0:12:55.679 --> 0:12:59.390 You cannot put in any more money. There are no 0:12:59.390 --> 0:13:04.280 catch up contributions, nothing when you turn age 50. Nothing 0:13:04.280 --> 0:13:09.760 is going to matter except that most people open up 0:13:09.760 --> 0:13:12.520 a SEP IRA, is its technical name, 0:13:13.260 --> 0:13:16.900 at a brokerage firm, where you can buy and sell 0:13:16.900 --> 0:13:19.659 anything you want, you own control over what's in there, 0:13:20.020 --> 0:13:23.590 all of that, that's how you normally do it. OK, 0:13:23.820 --> 0:13:25.820 I'll get back to that in a second. 0:13:26.590 --> 0:13:31.559 Now, just remember, it's a maximum of 20 to 25% 0:13:31.559 --> 0:13:35.669 of your compensation that you can put in, and to 0:13:35.669 --> 0:13:39.989 get close to that $72,000 you are making at least 0:13:39.989 --> 0:13:44.829 approximately $300,000 a year. Just know that. 0:13:46.090 --> 0:13:50.968 Let's leave SEPs for one second and switch to the 0:13:50.969 --> 0:13:56.010 solo 401k. Now, you might wanna draw two boxes again. 0:13:56.900 --> 0:13:59.590 And under this, you do the exact same thing as 0:13:59.590 --> 0:14:03.030 I asked you to do for the SEP. Again with 0:14:03.030 --> 0:14:07.270 the SEP, notice that the only hat that's allowed to 0:14:07.270 --> 0:14:13.718 contribute is the employer hat. Let's do the solo 401k. 0:14:14.030 --> 0:14:15.510 You have two boxes. 0:14:16.330 --> 0:14:21.119 An employer box or the boss, an employee box or 0:14:21.119 --> 0:14:22.570 the worker, all right. 0:14:23.619 --> 0:14:29.479 And again, for people who are self-employed with no employees, 0:14:29.940 --> 0:14:34.880 you can have your own solo 401k. And by the way, 0:14:35.140 --> 0:14:40.039 if your spouse works for the business, they can have 0:14:40.039 --> 0:14:44.159 their own solo 401k as well, just so you know. 0:14:44.700 --> 0:14:51.890 So let's look at the contribution limits under the solo 401k. 0:14:52.340 --> 0:14:57.900 Now under the boss hat it works identical to the 0:14:57.900 --> 0:15:03.020 boss hat of the SEP IRA. Those two hats, whether 0:15:03.020 --> 0:15:09.849 it is a SEP IRA or a solo 401k, are identical. Again, 0:15:10.099 --> 0:15:16.340 20 to 25% of compensation, up to the same 72,000 0:15:16.340 --> 0:15:20.809 overall max, identical, no difference there. 0:15:22.190 --> 0:15:28.130 However, listen closely to me now. Unlike the SEP IRA, 0:15:28.549 --> 0:15:34.489 the solo 401k does allow the employee or the worker 0:15:34.710 --> 0:15:39.419 to contribute. So under the worker hat, now listen closely, 0:15:39.789 --> 0:15:45.469 just like in your employer 401k, 403B TSP where you 0:15:45.469 --> 0:15:49.510 may work or you did work, the solo 401k works 0:15:49.510 --> 0:15:51.409 the exact same way. 0:15:52.200 --> 0:15:56.359 You can put up to write this down under that hat, 0:15:56.719 --> 0:16:03.659 up to $24,500 for 2026 if you're under 50. 0:16:04.539 --> 0:16:11.250 If you're 50 or older, the catchup contribution is $8000 0:16:11.590 --> 0:16:17.690 so you could put in this year $32,500 in that hat. 0:16:18.539 --> 0:16:22.799 If you are 60, 61, 62, your catch up jumps 0:16:22.799 --> 0:16:28.520 to $11,250 for a total of you having the ability 0:16:29.059 --> 0:16:36.479 to put in $35,750. Obviously after the age of 63, 0:16:36.979 --> 0:16:44.640 it drops back to $32,500. So let's just compare the two. 0:16:45.020 --> 0:16:46.099 Just let's compare them. 0:16:46.599 --> 0:16:50.599 And a SEP IRA, let's just say you're an S 0:16:50.599 --> 0:16:59.280 corp paying yourself $75,000 in W-2 wages, so 25%, which 0:16:59.280 --> 0:17:02.289 is what you are allowed to put in to accept 0:17:02.289 --> 0:17:10.478 the most of that $75,000 is $18,750. That would be 0:17:10.479 --> 0:17:12.219 your max contribution. 0:17:13.599 --> 0:17:19.020 Or let's say you're a sole proprietor maybe with $75,000 0:17:19.020 --> 0:17:22.380 of net Schedule C profit, and for those of you 0:17:22.560 --> 0:17:26.000 who are self-employed, you know what I'm talking about, but 0:17:26.000 --> 0:17:32.359 just listen to me. You could put in about $13,900 0:17:32.359 --> 0:17:37.959 max in your SEP IRA. Now let's just look at 0:17:37.959 --> 0:17:39.959 your solo 401k. 0:17:40.609 --> 0:17:49.410 The same 75,000 gets the same 18,750 or 13,900 under 0:17:49.410 --> 0:17:54.930 the boss hat contribution that doesn't change. However, it doesn't 0:17:54.930 --> 0:17:57.229 stop there for now. 0:17:57.619 --> 0:18:01.199 You put your worker hat on so you can also 0:18:01.199 --> 0:18:08.139 contribute an additional $24,500 if you're under 50 $32,500 if 0:18:08.140 --> 0:18:12.579 you're 50 or older, $35,750 dollars if you are 60 0:18:12.579 --> 0:18:13.760 to 63. 0:18:15.119 --> 0:18:21.199 Are you kidding me? And you would add either $13,900 0:18:21.199 --> 0:18:26.479 or $18,750 to any of those numbers so you can 0:18:26.479 --> 0:18:31.859 now see how many thousands more you could put away 0:18:31.859 --> 0:18:34.770 in a solo 401k. 0:18:35.650 --> 0:18:39.849 Did you hear what I just said to you? Why 0:18:39.849 --> 0:18:43.169 in the world would you be doing a SEP IRA 0:18:43.359 --> 0:18:46.389 in most cases? I'll tell you why in one second. 0:18:46.689 --> 0:18:51.679 But for most of you, listen again that are self-employed, 0:18:51.969 --> 0:18:57.010 whether you are a sole proprietor or a subchapters, whatever 0:18:57.010 --> 0:19:01.290 it may be, you are far better off doing. 0:19:01.920 --> 0:19:08.159 A solo 401k versus a SEP IRA to the tune 0:19:08.160 --> 0:19:13.979 of tens of thousands of dollars more per year. Quizzy time, everybody. 0:19:14.650 --> 0:19:17.250 Because I wanna make sure that you get this. This 0:19:17.250 --> 0:19:20.410 is so important. I can't even tell you. And for 0:19:20.410 --> 0:19:22.609 those of you who are like, Oh, Suze, I can 0:19:22.609 --> 0:19:25.920 barely fund my IRAs, whether it's a Roth or traditional 0:19:25.920 --> 0:19:29.750 right now. I can't do anything. You need to listen 0:19:29.750 --> 0:19:31.890 to this because one day you don't know what the 0:19:31.890 --> 0:19:36.530 future holds for you, do you? You don't know. So 0:19:36.530 --> 0:19:40.810 understand the rules now, so if ever you become self-employed, 0:19:41.829 --> 0:19:47.409 you'll know which retirement account to choose. Just that simple. 0:19:47.670 --> 0:19:51.790 As long as you have no employees, it's just you. 0:19:52.189 --> 0:19:57.229 This makes sense. All right, now, let's just say Diane 0:19:57.229 --> 0:20:00.209 is a freelance graphic designer. She's 42. 0:20:01.109 --> 0:20:03.550 And she wants to open a SEP IRA. 0:20:04.300 --> 0:20:09.060 And her business nets her enough that her boss hat, 0:20:09.180 --> 0:20:12.859 'cause she is the boss, and that's the only hat 0:20:12.859 --> 0:20:15.270 that can contribute to a SEP IRA. 0:20:16.119 --> 0:20:21.379 It is enough to allow her to contribute $12,000 this year. 0:20:21.880 --> 0:20:25.359 So Diane opens a SEP IRA. Here's your question. This 0:20:25.359 --> 0:20:28.909 is an easy one for you. How much can Diane 0:20:28.910 --> 0:20:33.709 put away for retirement in her SEP IRA this year? 0:20:34.109 --> 0:20:35.599 Write down your answer. 0:20:36.319 --> 0:20:40.939 And you should have written down $12,000. 0:20:42.989 --> 0:20:50.150 Now, same Diane, same income, same year, same age, but 0:20:50.150 --> 0:20:57.530 this time, Diane opens a solo 401k instead. How much 0:20:57.670 --> 0:21:05.419 can Diane now contribute totally to her solo 401k? Write 0:21:05.420 --> 0:21:06.180 it down. 0:21:07.479 --> 0:21:09.800 Now I'm gonna give you a few minutes here. 0:21:10.660 --> 0:21:15.899 Because remember in a solo 401k she has two hats 0:21:15.900 --> 0:21:20.900 the boss hat, which she can put in $12,000 but 0:21:20.900 --> 0:21:24.579 the worker hat or the employee hat where she can 0:21:24.579 --> 0:21:29.000 put in up to x. What is that? Add them together. 0:21:29.949 --> 0:21:38.510 Did you get it right? The answer is $36,500. Same woman. 0:21:39.630 --> 0:21:47.089 Same business, same exact income, but three times the retirement savings. 0:21:47.310 --> 0:21:52.750 Once again, why? Because within her solo 401k she can 0:21:52.750 --> 0:21:56.430 put in for the employee and the employer. 0:21:57.359 --> 0:22:01.540 So again, her boss hat puts in the same $12,000 0:22:02.040 --> 0:22:05.739 and the worker hat allows her to drop in another 0:22:05.739 --> 0:22:11.119 $24,500 on top of that. That's how we got to 0:22:11.119 --> 0:22:19.679 the $36,500 because remember Diane is under 50. So do 0:22:19.680 --> 0:22:20.699 you get it everyone? 0:22:21.380 --> 0:22:25.020 Now, I gave you a hint of who does it 0:22:25.020 --> 0:22:31.140 make sense for a SEP IRA versus a solo 401k. 0:22:31.920 --> 0:22:36.699 And here's the thing, if you're under 50, earning roughly 0:22:36.800 --> 0:22:41.359 $29,000 to 360,000 depending if you're an S Corp or 0:22:41.359 --> 0:22:42.780 sole proprietorship. 0:22:43.390 --> 0:22:47.030 It might make sense for you because it's simple, same 0:22:47.030 --> 0:22:51.879 amount of money, whatever it may be. However, everyone else, 0:22:52.109 --> 0:22:56.890 every age, every income, the solo wins on the math. 0:22:57.469 --> 0:23:01.530 But the solo also wins in another way. So listen 0:23:01.709 --> 0:23:03.629 closely here, OK. 0:23:04.430 --> 0:23:07.469 You know how I feel about Roth's. You know I 0:23:07.469 --> 0:23:12.569 want your retirement money to grow tax-free, have tax-free withdrawals, 0:23:12.750 --> 0:23:15.109 and that is the greatest gift you will always give 0:23:15.109 --> 0:23:17.449 your future self. You know that. 0:23:18.430 --> 0:23:22.750 The solo 401k, guess what? It can also be set 0:23:22.750 --> 0:23:28.689 up as a Roth solo 401k. So, if you are smart, 0:23:29.819 --> 0:23:35.540 you open up a Roth solo 401k, your entire worker 0:23:35.540 --> 0:23:41.540 hat contribution, every penny of that 24,500 plus, depending if 0:23:41.540 --> 0:23:45.939 you're 50 or older, so the catchups goes into the Roth. 0:23:47.270 --> 0:23:50.189 As much as you possibly can put in up to 0:23:50.189 --> 0:23:56.369 those maxes. However, most firms don't let you put in 0:23:56.869 --> 0:24:02.069 the boss hat in a Roth, all right, they just don't. However, 0:24:02.349 --> 0:24:06.750 I think Schwab currently allows you to do that, so 0:24:06.750 --> 0:24:10.369 you need to check it out before you do so. However, 0:24:11.609 --> 0:24:14.859 even where you can, and now this becomes complicated, so 0:24:14.859 --> 0:24:18.099 just listen to me for a second, even where you 0:24:18.099 --> 0:24:23.290 can put in the boss hat in a Roth section, 0:24:23.660 --> 0:24:25.780 and for reasons like I just said that are too 0:24:25.780 --> 0:24:29.899 complicated for this particular Suze School, you may be better 0:24:29.900 --> 0:24:35.780 off just maxing out the boss hat in a pre-tax anyway. 0:24:36.540 --> 0:24:39.109 And to just make it simple, this is because of 0:24:39.109 --> 0:24:43.069 something known as the QBI deduction, and it's a tax 0:24:43.069 --> 0:24:47.310 break many business owners get. So here's what I want 0:24:47.310 --> 0:24:51.729 you to do, especially if you're making larger amounts of money. 0:24:52.310 --> 0:24:55.409 Talk to your CPA and see if it makes sense 0:24:55.410 --> 0:24:59.750 to designate the employer your boss had money to the 0:24:59.750 --> 0:25:02.489 pre-tax side or to the Roth. 0:25:03.040 --> 0:25:06.680 And in case you have to designate it to the 0:25:06.680 --> 0:25:07.729 pre-tax side. 0:25:08.599 --> 0:25:14.050 Remember, pre-tax isn't a life sentence. It's a conversion waiting 0:25:14.050 --> 0:25:17.810 to happen, and you will convert it in lower income 0:25:17.810 --> 0:25:21.770 years like a slow business year, a sabbatical, the gap years, 0:25:21.839 --> 0:25:24.569 whatever it may be. Got that. 0:25:25.349 --> 0:25:29.390 So, those are the two differences. I just want to 0:25:29.390 --> 0:25:32.969 take one more minute of your time, maybe 5, we'll see, 0:25:33.310 --> 0:25:37.489 and talk about a SEP IRA cause many of you 0:25:37.489 --> 0:25:41.290 may choose to still do a SEP IRA. 0:25:42.640 --> 0:25:48.719 Now, even though the Secure Act 2.0 says legally you 0:25:48.719 --> 0:25:52.660 can set up a SEP Roth IRA, I don't know 0:25:52.660 --> 0:25:57.719 of any brokerage firms really that allow you to do so, 0:25:58.000 --> 0:26:00.438 and I think a lot of that has to do 0:26:00.439 --> 0:26:05.969 with the QBI and everything that I just mentioned before. However, 0:26:06.790 --> 0:26:09.890 you can set up a SEP IRA. 0:26:10.949 --> 0:26:12.589 Put money into it. 0:26:14.189 --> 0:26:18.369 Obviously, it's pre-tax, so you get to take a tax deduction. 0:26:18.910 --> 0:26:23.930 You immediately, however, if you want, can then convert it 0:26:24.270 --> 0:26:28.510 to a Roth IRA, no income limitations, nothing. 0:26:29.260 --> 0:26:32.800 And even though you're going to owe tax on that money, 0:26:33.670 --> 0:26:38.260 you got a deduction when you put it into the SEP. So, basically, 0:26:38.270 --> 0:26:42.430 it will offset it when you then convert it. That's 0:26:42.430 --> 0:26:45.550 a way to get a lot of money, more than 0:26:45.550 --> 0:26:49.709 a Roth IRA to begin with or whatever, into a 0:26:49.709 --> 0:26:55.369 SEP IRA that can then convert to a Roth IRA. 0:26:55.750 --> 0:26:59.469 Got that? So, this really is just one last thing 0:26:59.469 --> 0:27:00.469 that I want to say. 0:27:01.369 --> 0:27:04.649 Half of you listening have a day job. You have 0:27:04.650 --> 0:27:09.800 an employer sponsored plan, such as a 401k, 403b, whatever 0:27:09.800 --> 0:27:14.270 it may be, OK? And you have a side hustle, 0:27:14.530 --> 0:27:18.329 a side business that you've started on your own, and 0:27:18.329 --> 0:27:22.369 that business may be taking off. Maybe you're an influencer 0:27:22.369 --> 0:27:23.709 who knows what you are. 0:27:24.099 --> 0:27:27.139 And you are making a lot of money in that 0:27:27.140 --> 0:27:31.780 side business, besides what you are making at work. 0:27:32.589 --> 0:27:38.469 Your worker hat limit, that $24,500 or more, depending on 0:27:38.469 --> 0:27:41.270 your age. Remember, if you're 50, there's, it's more, if 0:27:41.270 --> 0:27:46.589 you're 60 to 63, it's more, is per person, not 0:27:46.589 --> 0:27:51.449 per plan. So maybe you're doing great again at work 0:27:51.500 --> 0:27:56.109 and you want to open up a solo 401k. If 0:27:56.109 --> 0:27:59.849 you max out the 401k at your day job. 0:28:00.520 --> 0:28:05.349 Then your worker hat is done for the year, period. 0:28:05.680 --> 0:28:10.540 You cannot put one more dime into the worker hat 0:28:10.800 --> 0:28:13.669 into your solo 401k. 0:28:14.619 --> 0:28:16.938 However, here's what you need to get: 0:28:18.099 --> 0:28:23.910 Your boss hat limits are separate for each business, so 0:28:23.910 --> 0:28:28.468 even after you've maxed out at work, you have that 0:28:28.469 --> 0:28:31.890 side business, whatever it may be, you can still open 0:28:31.890 --> 0:28:34.310 a solo 401k. 0:28:35.020 --> 0:28:40.219 And make the boss hat contribution to your solo 401k 0:28:40.459 --> 0:28:46.050 or solo Roth 401k if your CPA says it's OK. 0:28:46.670 --> 0:28:49.349 So that is a whole extra hat. 0:28:50.239 --> 0:28:55.099 So to speak, to help you with tax advantage savings, 0:28:55.280 --> 0:28:59.319 and most people don't even know the door exists, so 0:28:59.319 --> 0:29:03.719 you need to understand that now just one exception, I 0:29:03.719 --> 0:29:07.400 just have to say, government workers, if you're listening, if 0:29:07.400 --> 0:29:12.359 you have a 457B, it has its own separate limit, 0:29:12.599 --> 0:29:17.020 so it doesn't count against your worker hat. So even 0:29:17.020 --> 0:29:19.660 if you max out at work with that, 0:29:20.390 --> 0:29:25.280 you start your own solo 401k, you can max out, 0:29:25.439 --> 0:29:29.199 if you want, your worker hat in that as well. 0:29:29.920 --> 0:29:32.300 Did I just confuse the heck out of all of you? 0:29:32.939 --> 0:29:39.180 It's actually very, very simple, so you have to think 0:29:39.180 --> 0:29:44.180