Review of USAA CD Rates

USAA CD rates
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Founded and based in San Antonio, USAA is an FDIC-insured bank, insurance and financial services company that serves current and former military members and their families. Started by 25 U.S. Army officers, USAA has since grown to more than 11 million members. Most of their products are only available to USAA members, who are military members or their families.

USAA won a number of awards in 2016, including the title World’s Most Ethical Company from the Ethisphere Institute. It scored top rankings in the bank, insurance, and credit card categories in the Temkin Customer Service Ratings from 2013 to 2016.

Looking beyond high customer service standards, USAA CD rates are pretty comparable to the national average, though with some products they are significantly lower. Minimum deposit requirements are lower than with many similar products, though there are CDs out there with better rates and lower minimum deposits than USAA’s CDs. If you’re a member of the military (or a family member of military member) and looking for a bank that offers a wide variety of products as well as excellent customer service, USAA could be a good bet if you’re will to make the tradeoff for lower CD rates.

USAA Fixed-Rate CDs

A USAA fixed-rate CD is for those who intend to make one deposit to get a guaranteed rate of return over the agreed-upon term. Once you make your initial deposit (which differs depending on the type of CD you choose), your interest rate is set for the duration of the CD term. You are not allowed to make any additional deposits into your CD account after the initial amount.

Interest accumulates daily, and you have the choice to keep any interest earned in the CD until it matures (the interest will compound monthly) or have it paid out monthly to an account of your choosing. The CD will not be renewed automatically once it matures, though you have the option to do so if you want. If not, all the money in the account will be paid into an investment account until you withdraw it or invest it in another type of account.

Early-withdrawal penalties apply depending on the term of your CD:

  • Terms of 30 days or less: 30 days’ worth of interest
  • 30 days to 364 days: 90 days’ interest
  • 365 days to five years: 180 days’ interest
  • Five years or more: 365 days’ interest

Also, if you make a withdrawal within six calendar days of a deposit or another withdrawal, you’ll have to pay at least seven days’ worth of interest.

Standard rates

A standard CD requires a minimum deposit of $1,000 and up to a maximum of $95,000. This type of account is best for those who do not have a large amount of money to invest and want a guaranteed rate for their savings.

CD Term

APY

91 days

0.30%

182 days

0.56%

7 months

0.56%

270 days

0.66%

1 year

0.71%

15 months

0.95%

18 months

0.76%

2 years

0.81%

30 months

1.26%

3 years

0.91%

4 years

1.46%

5 years

1.06%

7 years

1.06%

As of 1/3/2018

USAA fixed jumbo CD rates

Fixed jumbo CDs require a minimum deposit of $95,000 and a maximum amount up to $175,000.

CD Term

APY

30 days

0.22%

91 days

0.35%

120 days

0.45%

150 days

0.50%

182 days

0.61%

7 months

0.61%

270 days

0.71%

1 year

0.76%

15 months

1.00%

18 months

0.81%

2 years

0.86%

30 months

1.31%

3 years

0.96%

4 years

1.51%

5 years

1.11%

7 years

1.11%

As of 1/3/2018.

USAA fixed super jumbo CD rates

Fixed super jumbo CDs require a minimum deposit of at least $175,000 with no maximum amount. However, FDIC only insures up to $250,000.

CD Term

APY

30 days

0.22%

91 days

0.35%

120 days

0.45%

150 days

0.50%

182 days

0.61%

7 months

0.61%

270 days

0.71%

1 year

0.76%

15 months

1.06%

18 months

0.81%

2 years

0.86%

30 months

1.36%

3 years

0.96%

4 years

1.56%

5 years

1.11%

7 years

1.11%

As of 1/3/2018

USAA Adjustable-Rate CDs

Like the fixed-rate CDs, the interest rate is locked for the entirety of the agreed term with an adjustable-rate CD. All interest is compounded daily starting on your settlement date (the actual date when your deposit goes into your account) and the interest either paid out monthly or kept in the account until your CD matures. Your CD will not be automatically renewed. Instead the money will be put into an investment account until you decide to put it back into another CD account or withdraw the entire balance.

Unlike with the fixed-rate CD, however, you can adjust your rate once during your CD term as well as make one other deposit when you request a rate adjustment. If rates go up, you can make an adjustment up to a 2 percent increase. The additional deposit needs to be a minimum of $25.

Early-withdrawal penalties are the same as with the fixed-rate CD:

  • Terms of 30 days or less: 30 days’ worth of interest
  • 30 days to 364 days: 90 days’ interest
  • 365 days to five years: 180 days’ interest
  • Five years or more: 365 days’ interest

In addition, you will be required to pay at least seven days’ worth of interest if you withdrawal money within six calendar days of either a deposit or another withdrawal from your account.

Standard rates

The minimum opening deposit for an adjustable standard CD account is $1,000. You’re allowed up to a maximum of $95,000. Otherwise, you will need to open an adjustable jumbo CD account.

CD Term

APY

3 years

0.12%

4 years

0.31%

5 years

0.43%

7 years

0.43%

As of 1/3/2018

Jumbo rates

Adjustable Jumbo CDs need a $95,000 minimum deposit and rates are applicable up to $175,000.

CD Term

APY

3 years

0.17%

4 years

0.36%

5 years

0.48%

7 years

0.48%

As of 1/3/2018

Super jumbo rates

Adjustable super jumbo CDs have a minimum deposit of $175,000 with no limits on how much you can keep in your account. Keep in mind that FDIC insures up to $250,000 in your account.

CD Term

APY

3 years

0.17%

4 years

0.36%

5 years

0.48%

7 years

0.48%

As of 1/3/2018

USAA variable-rate CDs

This type of CD account is best suited to those who want the ability to make more than one deposit any time they choose. The rate tends to be lower than the other CDs of the same term length, but you are allowed to make as many additional deposits as you like without extending the maturity date, as long it’s $25 or more each time. This could help you earn more on your deposits than you would with a traditional savings account, though there are better rates to be had among those products, as well.

Unlike the fixed- and adjustable-rate CDs, the interest rate on a variable-rate CD may fluctuate daily so earnings may be affected. However, interest is compounded daily and just like the other CD accounts and you can either keep earned interest with the CD balance and allow the interest to compound, or you can have it paid out to another account every month.

There are also early-withdrawal penalties with a variable rate CD. You’ll be charged 30 days’ worth of interest if you take your money out before the maturity date.

CD Term

APY

Minimum Deposit Amount

182 days

0.46%

$250

1 year

0.46%

$250

As of 1/3/2018

Overall review on USAA’s CD rates

Above all, it’s important to remember that only USAA members can get its products, so if you’re not eligible formembership, USAA CDs aren’t an option for you.USAA’s CD rates are not as competitive as other institutions’ products (you can see the best CD rates in our monthly roundup). While the $1,000 minimum deposit requirement is lower than some other banks that offer higher APYs on their CDs, you can get a better CD rate on accounts with deposit requirements as low as $500. While the rates for jumbo and super jumbo CDs are better than its standard offers, you can find better rates.

One of the main advantages of opening a CD with USAA is the ability to bump up your rate with an adjustable-rate CD, as other banks don’t always offer this option.. It’s important to note that a rate increase is not guaranteed. However, you are given an opportunity to make another deposit into your account before maturity.

As for USAA’s variable-rate CD, you may be better off opening a high-interest savings account if you’re looking for an account with a good APY and some liquidity.

Overall, if you want a bank with excellent customer service and the ability to choose from a wide variety of services, USAA is a good option. USAA may be your best choice if you want your CDs at a bank that understands needs specific to military members and their families. But if high yields are your priority, you’re better off looking elsewhere.

The post Review of USAA CD Rates appeared first on MagnifyMoney.

Review of Northwest Bank’s Deposit Rates

Formerly called Northwest Savings Bank, Northwest Bank offers a range of personal banking products and services including loans and insurance. Headquartered in Warren, Pa., Northwest Bank has 175 locations throughout New York, Pennsylvania and Ohio.

Northwest
Northwest Bank was on Forbes’ list of the Most Trustworthy Companies in 2016. JD Power touted Northwest for the “Highest Customer Satisfaction with Retail Banking in the Mid-Atlantic Region” in the same year.Customer service and trustworthiness don’t necessarily translate to the best rate for customers, however. Compared with the rates at other banks, like Ally, Goldman Sachs Bank USA, and Synchrony Bank, Northwest Bank’s deposit account rates are significantly lower for similar products.

When learning about the various accounts available at Northwest Bank, keep in mind that their rates vary depending on where you live. The rates listed below are based on the area closest to the bank’s headquarters. To get list of rates based on your region, please head over to the rates section of the bank’s official website and enter your ZIP code.

Northwest Bank CD Rates

The CDs at Northwest are locked in based on the term you choose, and interest earned can be compounded or paid out via check or direct deposit into a Northwest Bank account.

Term

APY

Minimum Deposit Amount

12-17 Months

0.30%

$500

18-23 Months

0.35%

$500

24-29 Months

0.45%

$500

30-35 Months

0.55%

$500

36-47 Months

0.60%

$500

48-59 Months

0.75%

$500

60-71 Months

0.90%

$500

72-120 Months

1.00%

$500

Rates current as of 1/3/2018

Northwest Bank’s CD accounts offer higher rates for longer terms. When a CD matures, you have a seven-day grace period where you can opt to roll over the account or take it out in cash.

There are early withdrawal penalties which vary depending on the term:

  • Account terms up to 181 days: one month of interest
  • Account terms 182 days to 364 days: three months of interest
  • Account terms 24 to 47 months: six months of interest
  • Account terms 48 months or longer: 12 months of interest

To withdraw money, you can do so easily using online or mobile banking or by calling your local branch. Early withdrawals will require you to call Northwest Bank; as long as you acknowledge and understand the penalties involved, you can access your cash.

How Northwest Bank’s CDs compare

Compared with competitors, Northwest Bank falls short in terms of APY. With its highest APY at 1.00%, it lags other banks offering almost double that. There are much better CD rates elsewhere and ones with shorter terms. However, the minimum deposit requirement at Northwest Bank is significantly lower than what you’ll find at many competitors, making this account more accessible to those who do not have large amounts to invest.

How to get a Northwest Bank CD

To open an account, you can call Northwest’s toll-free number at 1-877-672-5678, apply online or do so at your local branch.

Northwest Bank Savings Account Rates

Northwest Bank offers two different savings account options. The Statement Savings account is best for those who do not intend to keep a large balance in their accounts and don’t want to pay a monthly fee. The Insured Money Fund is best for those who seek more interest, want access to a Visa debit card and intend to keep larger sums banked.

Statement Savings

You can get access to free online and mobile banking and over 55,000 ATMs, but at the cost of a low APY.

APY

Minimum amount to open

Minimum balance requirement

0.05%

$50

$100

As of 1/3/2018

Interest earned on Northwest Bank’s Statement Savings account compounds and deposits monthly. In order to earn interest, you need to keep an average balance of at least $100.

With your account, you get access to eStatements and a free ATM card. If you already have a checking account with Northwest, you can link your account to your Visa debit card.

You can make deposits or withdrawals using your ATM card, online, via a mobile app or at a branch. However, you can only make unlimited withdrawals in person, by mail or at an ATM. Online withdrawals are limited to six withdrawals a month.

Insured Money Fund

Northwest Bank’s Insured Money Fund provides access to a Visa debit card and unlimited ATM and in-person transactions.

Minimum balance requirement

APY

Minimum amount to open

Up to $2,499.99

0.05%

$50

$2,500.00-$9,999.99

0.10%

$50

$10,000.00-$74,999.99

0.15%

$50

$75,000-$4,999,999.99

0.25%

$50

$5,000,000.00 and over

0.25%

$50

As of 1/3/2018

Compared with Statement Savings, you need to keep a higher balance but you get a higher APY that’s compounded monthly. As long as you keep an average daily balance of $2,500, you will not be charged a service fee. Any lower than that and you’ll have to pay $10 every month.

This account gives you a free Northwest Visa debit card. You can also write checks, deposit money at a qualifying ATM, and have access to monthly statements and direct deposit. You can access your money online, in person or through Bankline, a 24/7 automated telephone banking service. You also get unlimited ATM or in-person transactions.

How Northwest Bank’s Statement Savings a Insured Money Fund compare

The minimum opening balance is on par with some similar offerings from other competitors. However, the rates are much lower compared with what’s out there. You can easily find a savings account with 1.30% APY these days, some with no minimum requirements to open an account.

However, Northwest Bank offers more access to your money compared with others that only allow ACH transfers and check-writing capabilities. Many comparable banks also do not offer in-person customer service or debit cards. You can also make unlimited withdrawals at ATMs, compared with six per month with some of the other banks out there.

Other Northwest Bank Savings Accounts

Club Accounts

Club Accounts are designed to help you reach short-term savings goals, but you can do the same with money market accounts from competitors.

Account name

APY

Minimum amount to open

Term

Holiday Club

0.05%

$1.00

Nov.-Oct.

Vacation Club

0.05%

$1.00

May-Apr.

As of 1/3/2018

The Club Accounts are designed to help you reach your short-term savings goals for the busiest times of the year, whether for a vacation or gift giving. These as sub-accounts are designed for a specific purpose similar to a one-year CD. You choose the type of account based on when you want to access your savings, as both accounts offer the same APY and minimum opening deposit.

You fund your account in person, online, via direct deposit or by setting up an automatic transfer. Once the money is in the account, you cannot access it for the duration of the account. At the end of the savings period, you can have a check mailed to you or have it automatically transferred to a Northwest savings or checking account.

Compared with a one-year CD, this account falls short. For one, the rates are significantly lower, with some banks offering at least 1.75% APY for a 12-month CD with a minimum deposit of $500. However, you can access the cash earlier if you’re willing the face the penalties. If you have less than a few hundred dollars for an opening deposit, then the Club Accounts may be a good alternative.

Health Savings Account

Northwest Bank’s Health Savings Account allows you to access pretax funds easily for your medical needs, but at a lower rate compared with some competitors.

Minimum balance requirement

APY

$1,000.00-$4,999.999

0.05%

$5,000.00-$14,999.99

0.10%

$15,000.00 and over

0.15%

As of 1/3/2018

Opening a Health Savings Account (HSA), can help you set aside money for out-of-pocket medical expenses. As long as you’re covered under a qualified high-deductible health plan, you can use this account for pre-tax savings to help you cover health care costs.

Northwest Bank’s HSA account requires that you maintain an average daily balance of at least $1,000 if you want to earn interest and avoid a $3 monthly service fee. Like other accounts offered, you get access to online and mobile banking and ATMs. You also get a Northwest HSA debit card which is accepted by Visa merchants worldwide.

Competitors offer similar services with higher rates. However, some of these banks have mandatory monthly service fees of up to $4. With these accounts, you can access your cash the same way, except some offer Mastercard debit cards instead.

How to get a Northwest Bank savings account

You can open an account by phone, online or in person. You’ll need your social security number, personal information and a government issued ID.

Northwest Bank Checking Account Rates

MyNorthwest Interest Checking

This account offers one of the lowest interest rates, but has unlimited ATM transactions and a GO! Rewards account.

APY

Minimum balance requirement

Minimum amount to open

0.01%

$1,500

$50

As of 1/3/2018

MyNorthwest Interest Checking requires a minimum daily balance of $1,000 or else you face a $10 monthly service charge. There is also an overdraft fee of $35 with no grace period. However, you can opt in to a premium service that costs $12 a year. This service links your checking and savings accounts so that any possible drafts from one account will be withdrawn from the other.

Like the savings account, you get access to free ATMs, electronic statements, and online and mobile banking. You also get access to online bill pay and a Northwest Visa debit with Go! Rewards. With this program you earn points with each purchase to redeem for merchandise as well as the ability to use Apple, Android, and Samsung Pay.

How MyNorthwest Interest Checking compares

Compared to other banks’ checking accounts, Northwest’s checking account has a much lower rate. However, it offers free access to ATMs and rises above its competition with its Visa debit card. Not many banks offer GO! Rewards, which could be a huge advantage if you’re interested in earning rewards and plan on using your card often.

How to get a Northwest Bank checking account

To open a checking account, you’ll need your Social Security number, government-issued ID, and account information for existing bank accounts you want to transfer to Northwest Bank.

Northwest Bank IRA Account Rates

IRA CDs

Northwest Bank’s IRA CDs offer one of the lowest minimum deposit amounts, at the expense of a lower APY.

Term

APY

Minimum deposit amount

12-17 Months

0.30%

$500

18-Month Variable

0.35%

$25

18-23 Months

0.35%

$500

24-29 Months

0.45%

$500

30-35 Months

0.55%

$500

36-47 Months

0.60%

$500

48-59 Months

0.75%

$500

60-71 Months

0.90%

$500

72-120 Months

1.00%

$500

As of 1/3/2018

With the IRA CD, you can deposit money any time and in any increment you wish. Interest is compounded and credited every quarter. However, the interest rate is not fixed, meaning that the interest rate may fluctuate on the last day of each quarter.

When your IRA matures, you have a seven-day grace period in which to make withdrawals or roll it over. Early withdrawals are subject to the same penalties as their regular CD accounts

How Northwest Bank’s IRA CDs compare

The minimum opening deposit is one of the lowest out there, compared with some other IRA CDs that ask for a $1,000 minimum for an 18-month IRA CD. Like Northwest Bank’s other products, their IRA CDs offer a much lower rate, at least half of what its competitors offer.

How to get an IRA CD from Northwest Bank

You will need to apply for an IRA CD at the nearest branch.

IRA Tiered Money Fund

This account offers higher rates than their IRA CD, but still falls short compared with other banks.

Minimum balance requirement

APY

Up to $2,499.99

0.10%

$2,500.00-$9,999.99

0.10%

$10,000.00-$74,999.99

0.10%

$75,000.00 and over

0.25%

As of 1/3/2018

Like the IRA CD, you only need a minimum of $25 to open an account and deposit money as often as you want. There is a tiered interest based on balance, and interest is compounded and deposited every month. As well, there are no withdrawal restrictions, unlike the IRA CD where you may be penalized for early withdrawals.

If you’re looking for a similar product else with higher rates, you can consider a savings or checking account that may have tiered APYs.

How to get an IRA Money Fund from Northwest Bank

Visit your local branch to open an IRA Money Fund. You cannot open one online.

Bottom line

Although Northwest Bank offers free ATM access as well as a wide variety of customer service options, its rates are significantly lower than you’ll find with competitors. If you’re looking for a bank that offers more competitive rates with similar services, you may be better off looking elsewhere.

The post Review of Northwest Bank’s Deposit Rates appeared first on MagnifyMoney.

A Comprehensive Guide to the Solo 401(k) for Business Owners

If you run your own business, one of the difficulties in saving for retirement is that you don’t necessarily have easy access to a 401(k).

Enter the solo 401(k). This is a retirement savings option for self-employed business owners who have no employees and their spouses. Read on to find out how it works, who is eligible, and how you can open an account.

The Solo 401(k): Explained

What Is a Solo 401(k)?

Also known as a one-participant or individual 401(k), a solo 401(k) works just like a company-sponsored 401(k) would, except it’s for self-employed individuals who don’t have any other employees other than their spouses and themselves.

Just like a traditional 401(k), you can control how your money is invested. There are different plans, with most comprising stocks, bonds, and money market funds. These are considered “free” prototype plans offered by brokerages, and you’re typically limited to investments offered by that brokerage.

However, there are options for those looking to participate in alternative investments, such as precious metals or even real estate. There are companies that help you open what’s called a self-directed 401(k) and that sponsor “checkbook control” solo 401(k) plans, meaning that individuals can control the type of investments they want to make, whether it’s stocks, bonds, foreign currency, real estate, or commodities. You do so by writing a check for investment purchases, from a bank account dedicated specifically for that purpose.

Who Is Eligible for a Solo 401(k)

Only self-employed individuals and their spouses are eligible for a solo 401(k). This plan is ideal for consultants, independent contractors, or sole proprietors. If you hire part-time workers or contractors, then you’re still safe. However, if they work for you for more than 1,000 hours a year, you cannot participate in a solo 401(k).

Furthermore, you need to have the presence of self-employment activity to be eligible, which includes ownership and operation of an LLC, C, or S corporation, a sole proprietorship, or a limited partnership where the business intends to make a profit. There are no criteria as to how much profit a business needs to generate, as long as you run a legitimate business with the intention to generate a profit.

If you are currently employed elsewhere, you can still open a solo 401(k) account if you’re serious about maximizing your pre-tax savings. If you work for an employer that offers a 401(k) plan, you can still participate in their plan alongside a solo 401(k) plan, as long as you don’t exceed the contribution limits.

Where to Open a Solo 401(k)

You can open a solo 401(k) with most major brokerages. For those looking for a custom plan, there are companies that specialize in providing those plans. Some insurance companies also offer solo 401(k) plans but only if your goal is to invest solely in annuities.

Below are some of the most popular companies offering solo 401(k) plans:

Vanguard – The individual 401(k) offers all Vanguard mutual funds. However, you cannot purchase exchange-traded funds (ETFs) or mutual funds from other companies and cannot take out a loan. There is no setup fee, but there is a $20 fee per account per year to maintain your solo 401(k).

SunAmerica – The SunAmerica Individual(k) offers mainly annuities as part of their plan. You can take out a loan (for a fee). It costs $35 to set up your account, and there is an annual maintenance fee of $75.

E-Trade – The E-Trade Individual 401(k) Plan allows Roth contributions and has a brokerage option with $9.99 trades for any ETF. They accept IRA rollovers and allow for loans. They also will pay you if you transfer your current solo 401(k) to them: $200 for $25,000-$99,000, $300 for $100,000-$249,000, and $600 for a $250,000+ plan.

How to Establish a Solo 401(k)

When opening a solo 401(k) plan, you want to choose the option best for your needs. Once you’ve selected your brokerage, you’ll need to have the necessary documents:

  • 401(k) plan adoption agreement
  • Designation of successor plan administrator, which requires a notary or a witness
  • Brokerage account application
  • Designation of beneficiary form
  • Power of attorney (optional)

If you plan on opening one for your spouse, you’ll need to do twice the paperwork (one form for each person).

Remember, you need to open a solo 401(k) account by December 31 of the tax year. You don’t need to actually fund it until the April 15 filing deadline. If you miss opening an account, you’ll have to wait until the next tax year to do so.

How Much You Can Contribute to a Solo 401(k)

Participants in a solo 401(k) plan can make contributions both as an employee and an employer.

For elective (employee) contributions, you can contribute up to 100% of your earned income, up to the annual contribution limit, which is $18,000 in 2017. Those age 50 or older can contribute an additional $6,000, depending on the type of plan, according to the IRS.

When making a contribution as an employer, you can contribute up to 25% of your earned income as an employee. Your total contributions cannot exceed $54,000 in 2017 ($53,000 for 2016), not counting extra contributions for those 50 or older.

For example, Mary earned $40,000 from her freelance business in 2016. She put $18,000 in this plan as an employee. As an employer, she contributed 25% of earnings, which is $10,000. In total, she contributed $28,000, which is the maximum she can contribute.

Remember, contribution limits are for each person, not each plan. If you are working full time for another employer and participate in that company’s 401(k) plan, combined contributions to your traditional 401(k) and solo 401(k) cannot exceed the annual limit.

To figure out the maximum contributions you can make, check the IRS website on how to calculate a more accurate amount.

Read more: 9 Essential Tax Tips for Entrepreneurs >

Learn More About Solo 401(k)s

The Pros of a Solo 401(k)

The solo 401(k) has higher contribution limits compared to other retirement savings plans. You can contribute up to $18,000 plus 25% of earned income, compared to a maximum of $54,000 or only 20% your earnings (whichever is less) with a SEP IRA. Your employer contributions are also tax deductible.

You also have the option to borrow up to 50% of your account’s value or $50,000, whichever amount is less.

The Cons of a Solo 401(k)

A solo 401(k) can get complicated to set up and maintain, particularly if you intend on opening a customized plan. Depending on the company you go with, fees can cost you at least a few hundred dollars to set up an account, not including fees to maintain the plan annually.

Even if you open a prototype plan, it can cost you. Yes, it’s free to set up, but they put many requirements on you as the owner. These requirements include filing tax return documents once a year if your plan has more than $250,000 in assets and keeping up to date with all records and transactions.

Alternatives to a Solo 401(k) Plan

There are two alternatives to a solo 401(k) plan — a SIMPLE IRA and a SEP IRA. The main difference between each is the maximum amount you can contribute to each year.

SIMPLE IRA – A Simple IRA plan is for those who as an employee (including those who are self-employed) have earned a minimum of $5,000 any two years before the current calendar year and expect to receive at least $5,000 for the current calendar year. You can contribute up to $12,500, plus an employer match of 3% of employee compensation. Those 50 or older can also contribute up to an extra $3,000. You can find more information about the simple IRA on the IRS website.

SEP IRA – A Simplified Employee Pension (SEP) plan only allows employers to contribute to the plan, unlike a solo 401(k). Employers can contribute a maximum of $53,000 or 20% of their net self-employment earnings, whichever amount is less.

Even with all its benefits, there may be a few reasons why someone is better off not opening a solo 401(k). “If you’re concerned about doing additional paperwork, a SEP IRA might also be a better choice,” advises Robert Farrington, founder of the College Investor. “If you’re working a side hustle and have a regular 401(k) at your day job, the alternatives might be easier.”

Who Solo 401(k) Plans Are Best For

While any of the above options are helpful for self-employed individuals, the solo 401(k) is best for those who are looking to invest heavily in their savings. “The solo 401(k) is best suited for a self-employed individual who wants to maximize their retirement savings,” says Farrington.

“Furthermore, if you’re a husband/wife/spouse team, your spouse can also contribute to the solo 401(k) with the same percentage of ownership, so you can get even more in tax savings and retirement contributions.”

The post A Comprehensive Guide to the Solo 401(k) for Business Owners appeared first on MagnifyMoney.