A lot of Tuesday mornings we have at least, at least one sometimes two, but always, always we get to chat with Matt Krieger from Pioneer Financial Consultants.
Good morning, sir.
How's Matt doing today?
I am doing well, Gray.
How are you?
Quite well today.
As usual, it's beautiful weather, so it's a beautiful day.
But honestly, even if it were bad weather, I might have a good mood on me today because it's another beautiful one in the Northwoods.
Even if the weather's ugly, we're lucky to be here, Matt.
How's it going in the financial world?
Absolutely.
No, it's going well.
A lot like the weather today.
So beautiful, beautiful day.
retirement plan for self employed individuals.
So if you're self employed, this is certainly something that you may want to consider.
And that's what's called an individual 401k.
Alright, that, I mean, is a sensible question and I'm sure a lot of people considering self-employment or starting a business or whatever you might want to call it, that's definitely where my mind would go.
What would I do for health insurance and retirement and all these sorts of things?
Maybe not insurance today, but tell us about those retirement options for people who are self-employed.
Yeah, so know that if you're self-employed or own a small business, you've probably considered establishing a retirement plan or at least thought about it.
And if you've done your homework, you likely know about simplified employee pensions, sometimes known as SEPs, and saving incentive match plans for employees or simple IRAs.
These plans typically appeal to small business owners because they're relatively straightforward and inexpensive to administer.
What you may not know is that an individual 401k plan, sometimes called or referred to as a solo 401k, offers a different and in some ways better combination of benefits.
So the first big question I want to answer Gray is, what is an individual 401k plan?
And an individual 401k plan is a regular 401k plan combined with a profit sharing plan.
However, unlike a regular 401k plan, an individual 401k plan can be implemented only by self-employed individuals or small business owners who have no other full-time employees.
So that's an important one, Gray, here, is if you have other full-time employees,
This plan is probably not a good or viable option for you.
But if you're truly self-employed, do not have any employees.
This is definitely something to consider.
Know that there is an exemption if your only other full-time employee is your spouse.
Second, what makes an individual 401k plan attractive?
One feature that makes an individual 401k plan,
an attractive retirement savings vehicle is that in most cases, your allowable contribution to an individual 401k plan will be as large or larger than you can make under most other types of retirement plans.
So, Gray, I know a lot of times when I talk about
Contribution limits in 401ks versus simple plans versus versus the 401k will generally have as large or larger contribution limits.
And with an individual 401k plan, you can elect to defer up to $24,500 of your compensation to the plan for 2026.
plus catch up contributions if those apply with your age.
And just as you could with any 401k plan.
In addition, as with a traditional profit sharing plan, your business can make a maximum tax deductible contribution up to the plan of 25% of your compensation.
So because your 401k elected deferrals don't count towards the 25% limit, you as an owner employee can defer the maximum amount of compensation under the 401k plan and still contribute up to 25% of total compensation to the profit sharing plan on your behalf.
Know that total contributions for 2026 cannot exceed the lesser of 72,000.
dollars or 100% of your compensation.
Well, and you mentioned something, Matt, that I think is critical to this, that, you know, you mentioned you as the owner employee, you know, a person is really kind of both and sort of neither at the same time.
And people who own businesses, it's kind of a, for me, it's a piece of mental gymnastics to imagine that being both the employer and an employee at the same time.
But this is basically a way for you to maximize the benefits of both of those roles that you hold at the same time.
Because if you acted just as your own employer, then you might not be getting the
maximum in your retirement.
And likewise, if you just take advantage of employee opportunities, this is kind of a niche created for those who are both because we need to address that very particular and unique need.
Am I correct there?
Right.
Yeah, that's exactly it.
And this example here that I have next is exactly explaining just what you were talking about in that special niche that
that you can do to take advantage of that.
So an example would be, let's say Dan is 35 years old and the sole owner of an incorporated business.
His compensation is, in 2026, is $100,000 and has set up a individual 401k plan for his retirement.
Under current law, Dan's account can
except a tax deductible business contribution of $25,000.
That's that 25% from the business, right?
That profit sharing piece.
And he could also defer through his own employee contributions, $24,500, which would be a total of $49,500 into the 401k this year, which is less than the annual income or contribution limit of $72,000.
So again, great, that was kind of
an example of exactly what you were just saying, having both pieces as the owner and the employee.
All right, I mean, and that's again, this is exactly the kind of question I'd be asking myself about.
So for me, this is basically just, hey, that's an interesting little thing.
I don't currently own my own business.
I don't employ myself.
But these are still things that people who are in a more traditional form of employment might want to explore, be knowledgeable about things like your contribution limits and catch up options.
These are things that might apply to me, even though I don't own my own business, correct?
There's part of this I can take for myself.
Absolutely.
Absolutely.
Because a lot of the same rules still apply as far as contribution limits and things like that for the more regular 401k with multiple employees.
So there are a lot of similarities there, no doubt.
Well, and of course, Matt, we always circle back to that same question, which is, how does this affect me?
My unique scenario, if I maybe did own a business previously and I hadn't been in a retirement count then, but maybe I have moved on from that.
Long story short, what you're going through is unique, but there's somebody out there who knows what it is and how to deal with it, and that is pioneer financial consultants.
Matt, anything else you want to touch on?
before we wrap it up today?
Yeah, just a couple other advantages of the 401k.
Know that contributions to an individual 401k plan are completely discretionary.
So each year, that amount can change.
You know, that happens a lot being self-employed, where maybe there's a good year, you can contribute a little bit more, and the next year may not be as good.
You can reduce the amount that you contribute to the 401k plan.
And just like 401k, a lot of 401k plans, excuse me, an individual plan, individual 401k plan does allow for loan or can allow for loans and hardship withdrawal withdrawals if necessary.
And those individual 401ks can also accept rollovers from other maybe previous employer plans.
If you're someone that worked for someone for many years and have a 401k
or a SAP or a simple plan somewhere else, they can be rolled into your individual 401k as well.
So just some very nice rules there that most 401k plans also accept.
And it might seem complicated to people thinking, man, how can I possibly wade into this and even start to ask the right questions?
Well, the simple answer there is to gain the assistance of somebody like pioneer financial consultants.
But the simple answer, Matt, and back me up or call me crazy on this is, yeah, it's complicated to dive into this, but it'll only be worse if you don't plan for this sort of thing, plan for your retirement and ask that question.
What does this mean for me?
Absolutely.
Absolutely.
And like you said earlier, Gray, every every situation is different.
Certainly not the individual forum came may not be the best fit for everyone, but that's where.
um knowing each individual circumstance
yeah so our phone number is uh seven one five seven four eight three two three one um our website is www.pioneer-financial.net and on our website you can certainly
send us a message if you like to communicate that way and if you'd like to listen back to this whole conversation to show that friend hey this situation might apply to you
or to refresh your own memory to hear what we were talking about today.
I will make it possible for Matt to put that on the Facebook page for Pioneer Financial Consultants.
Matt, thank you so much.
We'll chat with you again next Tuesday.
Sounds great.
Thank you.
My pleasure the topic today was self-employment and retirement planning But it's always a unique scenario if you're dealing with your finances Whatever the case may be even if you look exactly like the person next door to you There's probably something lurking in the background that we want to plan for so put those details in front of pioneer financial consultants and do it today find them on Facebook and plan for your future our future immediately speaking at least a couple quick messages and then
Again, I've got one of those classic country songs we've been playing here and there.
A true throwback coming up on 98Q Country after this.
Pioneer Financial Consultants is located at 882 East Perkins Street, Medford, Wisconsin, 54451, 625 Ellingson Avenue, Hawkins, Wisconsin, 54530, and 297 Northlake Ave, Phillips, Wisconsin, 54555, phone number 715-748-3231.
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