Being a self-employed truck driver comes with the benefits of flexibility and not having to answer to a boss, but one downside is trying to find a way to save for retirement is entirely the responsibility of the driver. Fortunately, there are some retirement options that are specifically designed for self-employed individuals like a lot of truck drivers are.
Roth IRA Contributions
Contributing to a Roth IRA is beneficial for self-employed individuals because it provides tax incentives for saving for retirement. Although there are no tax benefits for contributions made to a Roth IRA account, there is no tax due on interest or withdrawals from the account. This means that drivers can see exactly how much they will have to live on when it comes time to retire when they have a Roth IRA account.
There are no penalties for taking money out of a Roth IRA retirement account starting at 59.5 years of age.
Solo 401(k) Plans for Additional Saving
The problem with saving through a Roth IRA is that there is a contribution limit of $5,000 per year. Individuals over the age of 50 may contribute a maximum of $6,000 per year to a Roth IRA. Truck drivers should consider contributing to a Roth IRA, but contributions over the limit can be made through a Solo 401(k).
Individuals may put up to $50,000 toward a Solo 401(k) every year, and anyone over the age of 50 is allowed to contribute an additional $5,500. Unlike a traditional 401(k), many Solo 401(k) investments are up to the individual who is putting money into the retirement plan. Instead of a mutual fund that consists only of stocks and bonds, investment instruments including real estate and precious metals can also be chosen.
Truck drivers who have more than $250,000 in a Solo 401(k) will need to file a 5500-EZ tax form when income tax returns are due. As with a traditional 401(k), Solo 401(k) contributions are tax-deferred.
Self-employed professionals may find retirement savings daunting and confusing, but opting for a Roth IRA for up to $5,000 and contributing amounts over $5,000 to a Solo 401(k) are the best options for most individuals.