# Could a full time driver create an Independent 401(k) ?



## Dammit Mazzacane (Dec 31, 2015)

I looked at this and it made me wonder-- an Independent 401(k) is for a sole proprietorship, which any rideshare driving gig constitutes:

https://www.investopedia.com/terms/i/independent_401k.asp
Not firmly clear if you must incorporate as an LLC. I know some of you have done so.


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## WindyCityAnt (Feb 24, 2019)

Incorporate yourself? Whats the use? Makes no sense! There are other way to invest your income IF your doing so well driving. Which i doubt! Thanks Goober! 🤔


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## dauction (Sep 26, 2017)

absolutely.. I have a SEP IRA..

Very simple to set up..your bank probably offers them otherwise I would go to Prudential.com

This is the smartest thing you can do..! The Money adds up fast (allowance Limit is how much money you can put in each year...up to 53,000 ! don't let that phase you.. you can simply sock away $150 a month..whatever you want ..it will add up quickly

*SEP IRA*

_Allowance Limit:_ 2016 limit is $53,000.
_Advantages:_ Simple setup, with low administrative charges and responsibilities.
_Disadvantages:_ A Solo 401k may allow a higher contribution and tax deduction, and it provides the option of a $6,000 catch-up contribution for those 50 years of age and older.
A SEP IRA is perfect for small businesses such as Uber Drivers, and can be established by any company owner. As with many other plans, you have until the tax-filing due date of the company, including extensions, to fund the SEP IRA. You aren't required to contribute to the plan every year - an attractive feature for businesses that have earnings that vary a lot from one year to the next. This provides business owners with the flexibility to reduce or forego contributions in years when profits are below expectations.

*Solo 401k*

_Contribution Limit:_ 2016 limit is $53,000 ($59,000 if age 50+, thanks to a catch-up provision).
_Advantages:_ Possibly higher retirement contribution limits at identical income levels. Loans are permitted of up to 50% of the total value, with a $50,000 maximum.
_Disadvantages:_ Possibly greater administrative fees and responsibilities.
Self-employed workers who qualify for the Solo 401k receive the same tax benefits as those with a traditional 401k. Business owners who wish to contribute more than the maximum allowed by a SEP IRA may benefit from establishing a Solo 401k.

The 401(k) has a loan option, for instance. And with the SEP, "the minute you hire an employee, you must contribute the same amount of money to that employee's SEP as you're paying into your own.

SEP-IRAs offer flexibility if your small business or sole proprietorship grows to a point where you add employees. You don't immediately have to start profit sharing to any new employees. SEP-IRA's only requires you to make profit sharing contributions to eligible employees who have worked full time for you over the last 3 out of 5 years. If you have part time employees who work less than 1000 hours, you don't have to include them in the plan. Individual 401k's do not allow any plan participation for employees unless they are a spouse. Spouses can participate in both type of plans.

Both plans can offer a great way for you to save for retirement and to realize some tax savings in the process. Whether you go this route or with some other option I urge to start saving for your retirement *today*.


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## Famous Last Words (Aug 19, 2020)

Rideshare driver and business owner seems contradictory.


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## Amos69 (May 17, 2019)

Famous Last Words said:


> Rideshare driver and business owner seems contradictory.


Anyone who thinks this is dumber than a box of rocks.


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## KevinJohnson (Mar 23, 2020)

@dauction is correct. SEP IRA is a great way to go.


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## kingcorey321 (May 20, 2018)

Your a driver . Making jack shit.
Your best investment right now is to pay off all credit cards car payments medical bills . All your debt .
Forget the stupid IRA. This is for old people over 65 senior citizens . Ira same risks as the stock market except the tax break But they move so slow boring it snot worth it . You will see slower swings upwards and dreadful downwards .They may slam and take forever to come back ! I have seen it for years . Trash !
If you want to be more aggressive then look into ETF. research it. No need to worry about a single company earning report.
You could make a very good retirement from one .
I suggest just setting up a broker account and buying these etf yourself.
Divide them into many different sectors ... 
Energy: XLE.
Materials: XLB.
Industrials: XLI.
Consumer Discretionary: XLY.
Consumer Staples: XLP.
Health Care: XLV.
Financials: XLF.
Information Technology: SMH.
https://www.investopedia.com/financial-edge/0712/etfs-or-mutual-funds-for-your-ira.aspxDo not buy the ones i posted there just a example .
My opinion if your under 40 and you have 40k to invest why not open your own business ? 
And finally i hate the market chart right now . ( I am thinking there will be a major downturn soon ! ) 
Its premature high the zero interest rate supported . We may be set up for a disaster stock market in the near future . 
Experts do not know i do not know. I have a feeling .
If you see this chart hit 200 its time to go long in a long term situation . If not then strong pass. 
https://www.google.com/search?q=spy....69i57j0l7.4648j0j15&sourceid=chrome&ie=UTF-8


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## dauction (Sep 26, 2017)

kingcorey321 said:


> Your a driver . Making jack shit.
> Your best investment right now is to pay off all credit cards car payments medical bills . All your debt .
> Forget the stupid IRA. This is for old people over 65 senior citizens . Ira same risks as the stock market except the tax break after you retire . You will see slower swings upwards and dreadful downwards .
> If you want to be more aggressive then look into ETF. research it. No need to worry about a single company earning report.
> ...


Ummm NO... Starting a SEP or 401K now means later in life (and trust me it goes by fast) OP will be better off finacially. And can BORROW against the Ira in an emergency

Saving 2K a year for a 20 year old until retirment










at just 50 =









Compare that to paying off 15K in debt over 20 years .. just stupid..

Yes absolutely have a plan on paying off debt but the single most important thing he can do is PAY HIMSELF FIRST


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## Famous Last Words (Aug 19, 2020)

Amos69 said:


> Anyone who thinks this is dumber than a box of rocks.


I see my attempt at humor went over your head


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## Dammit Mazzacane (Dec 31, 2015)

dauction said:


> absolutely.. I have a SEP IRA..


Thanks for the input - are you also incorporated, or no? (I don't know if an LLC is required.)


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## RideShare_Hustler (Jun 18, 2020)

I’d rather invest in passive income, by the time you’re 70 those 401k numbers are chump change in comparison.


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## UberTaxPro (Oct 3, 2014)

Dammit Mazzacane said:


> I looked at this and it made me wonder-- an Independent 401(k) is for a sole proprietorship, which any rideshare driving gig constitutes:
> 
> https://www.investopedia.com/terms/i/independent_401k.asp
> Not firmly clear if you must incorporate as an LLC. I know some of you have done so.





Dammit Mazzacane said:


> Thanks for the input - are you also incorporated, or no? (I don't know if an LLC is required.)


LLC is not required


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## Disgusted Driver (Jan 9, 2015)

Given how low tax rates are now and pr prospects for inflation, I would seriously consider Roth IRAs. It's after tax income but you pay no taxes when you take out later, income is tax free if you are over 62 when withdrawing.


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## KevinJohnson (Mar 23, 2020)

Disgusted Driver said:


> Given how low tax rates are now and pr prospects for inflation, I would seriously consider Roth IRAs. It's after tax income but you pay no taxes when you take out later, income is tax free if you are over 62 when withdrawing.


Roth IRA are great if you get a W2. For the self employed the SEP reduces your income tax and your self employment tax also.


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## dauction (Sep 26, 2017)

Dammit Mazzacane said:


> Thanks for the input - are you also incorporated, or no? (I don't know if an LLC is required.)


No ..you do not need to be incorporated .. Fidelity has a very easy sign up for a SEP .. simply sign up and fund the account which whatever you want to put in $10- $25, $100, $,5000 .. whatever you want to save ..and you can make as many deposits you want per year ..remember everything you put in lowers your taxes at the end of the year.


















https://accountopening.fidelity.com...fering=&tab=All&refpr=asclpa005#1597997939386
Once you have money in you can choose what investments you want stocks, mutual funds REITs... This is retirement money ..so you don't really want to be doing risky investments .. Until you learn more just stick with Mutual Funds

https://www.fidelity.com/building-savings/learn-about-iras/ira-choosing-investments
Come back and in 6 months and post how you feel about having a little money saved up .. it will feel good knowing you won't have to depend on just social security as long as you keep stashing money away.


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## Dammit Mazzacane (Dec 31, 2015)

OK. Thanks dauction, although I would humbly comment that I already have money set aside in a Roth IRA for retirement and am doing alright there. 


My main curiosity centers on directing rideshare income into an investment platform, hence this 401(k) inquiry.


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## dauction (Sep 26, 2017)

Dammit Mazzacane said:


> OK. Thanks dauction, although I would humbly comment that I already have money set aside in a Roth IRA for retirement and am doing alright there.
> 
> My main curiosity centers on directing rideshare income into an investment platform, hence this 401(k) inquiry.


Perfect ! You can also have a SEP/401K


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## FLKeys (Dec 27, 2018)

Dammit Mazzacane said:


> I looked at this and it made me wonder-- an Independent 401(k) is for a sole proprietorship, which any rideshare driving gig constitutes:
> 
> https://www.investopedia.com/terms/i/independent_401k.asp
> Not firmly clear if you must incorporate as an LLC. I know some of you have done so.


I have set up a Solo 401(k) with Vandguard, they supply all the paperwork you need and if you put your funds into Vandguard funds there are minimal fees. To me it is only beneficial if you make a taxable profit, you can essentially but your taxable profits into a 401(k) Solo and defer paying taxes until retirement. Also you can still contribute to a Roth IRA and and max that out each year. Between the two you can really maximize your retirement account.

The nice thing about the Roth 401(k) is you can contribute the full employee amount and the full employer amount, however you can not exceed your taxable profits.

I had a thread about this about a year ago. There is also a website called mysolo401k.net you can use to get a better understanding of how the whole thing works, in my opinion they charge too much for the service, however they will answer your questions and will give you the forms to get your EIN number you need for the bank account that will transfer money into the 401(k). Basically I have an account at my bank with $1.00 in it and it is tied to my EIN. At tax time I calculate my taxable self employment income than calculate how much I can contribute to the Solo 401(k) reducing my taxes to$0.00, you can contribute up until tax day for the previous year making sure you can maximize your contribution. Basically by April 15th of 2021 you can contribute into your account for calendar year 2020. Keep in mind if you are going to do this for 2020 you have to open your account before December 31st 2020 to make contributions by April 15th 2021.


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## 197438 (Mar 7, 2020)

Dammit Mazzacane said:


> I looked at this and it made me wonder-- an Independent 401(k) is for a sole proprietorship, which any rideshare driving gig constitutes:
> 
> https://www.investopedia.com/terms/i/independent_401k.asp
> Not firmly clear if you must incorporate as an LLC. I know some of you have done so.


For every dollar of income that finds its way into my checking account, $0.10 goes into an online savings account (which is used to ladder into CDs for higher interest), $0.10 goes into a taxable brokerage account (car replacement fund), and $0.10 goes into a Roth IRA. Pay off the credit cards every month...never carry credit card debt...that debt will prevent you from getting out of the paycheck-to-paycheck lifestyle. It took decades of saving, but dividends now return more money to my IRA every year than I can save from paychecks, and I will never have to pay taxes on that income when I withdraw it later in life. A growing faction of Socialist Democrats wants to tax your IRA dividends, like they do in Europe, which is why Sanders and Warren and AOC can never be allowed to run the country.


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## Mista T (Aug 16, 2017)

A SEP IRA is better for a sole proprietor than a 401(k). If you have extra money to contribute, you should also set up and fully fund a Roth IRA.

This assumes you are in America.


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## FLKeys (Dec 27, 2018)

Mista T said:


> A SEP IRA is better for a sole proprietor than a 401(k). If you have extra money to contribute, you should also set up and fully fund a Roth IRA.
> 
> This assumes you are in America.


If I remember correctly SEP IRA's have a limit of 25% of your income, setting up a Solo 401(k) gives you the ability to put in much more because you can do an employee contribution up to $19,500 and an employer contribution up to 20% of net income not to exceed a total of $57,000 for 2020.

Essentially I can put away 100% of my taxable income into a Solo 401(k).

I guess ultimately incomes down to how much money you want to put away what option is best for you.


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