Why You Should Consider a 'Solo 401(k)'
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With your money briefing, I'm Charlie Turner for the Wall Street Journal in New York. Why should you consider choosing a solo 401k retirement plan? J.R. Whelan will discuss this with Wall Street Journal contributor Jeff Brown. First, here are some money headlines. Mortgage lenders are on a refi high. Lenders made $565 billion of mortgage loans in the second quarter, the most in more than two years as falling rates prompted homeowners to refinance. At that pace, Originations could top $2 trillion for only the third year since the financial crisis, according to industry research group Inside Mortgage Finance. The rebound provided a boost to megabanks like JPMorgan Chase, Wells Fargo, and Citigroup, which reported higher mortgage originations.
Inside Mortgage Finance said refis accounted for roughly half the new mortgages, the highest share in years. Refinance applications rose 43 percent in the second quarter from the same period a year earlier, while purchase applications climbed 6.2 percent over that span, according to the Mortgage Bankers Association. Tough times for ride-hailing companies and their investors. Uber Technologies and Lyft went through separate staff shakeups Monday as Uber cut about 400 jobs in its marketing department and Lyft eliminated the role of chief operating officer. The two ride-hailing companies have been under pressure from Wall Street amid heavy losses and disappointing market debuts. with both stocks still sagging below their initial public offering prices.
LetsMakeAPlan.org is regarded as the go-to site for people seeking a financial advisor.
What is a solo 401(k) and who is it designed for?
The site is a directory operated by the Certified Financial Planner Board of Standards. But the Wall Street Journal says Let's Make a Plan omits numerous red flags. It contains no indications that thousands of the planners bearing the board's seal of approval have had customer complaints or faced criminal or regulatory problems, often directly related to their work with clients. More than 60 have filed for bankruptcy within the past decade, although the website says they haven't disclosed such an event in the last 10 years. The letsmakeaplan.org site has been presenting more than 6,300 planners without showing such problems, even though the planners have disclosed them to the Financial Industry Regulatory Authority, according to a Wall Street Journal analysis of more than 72,000 profiles on the website.
Here on Your Money Briefing, we've brought to you lots of useful stories regarding 401k retirement accounts. like annuities providing years of income or why you might consider a Roth 401k. Now here's something else, a solo 401k. Let's find out more about that and bring in Wall Street Journal contributor Jeff Brown. So Jeff, millions of Americans have signed up for traditional 401k accounts through their employers, but a solo 401k, that's mostly geared toward freelancers, right?
Yes, I'm a freelancer and I have one myself. Solo means what it sounds like. You have to be working for yourself. If you have any employees at all other than a spouse, you're not eligible. But otherwise, it works very much like a corporate 401k, but it's a little simpler to set up and get running.
So people can sign up for solo 401ks as employees or employers?
Yes, you wear two hats when you do this. You can make a contribution as the employee. And this year, that can be up to $19,000 or $24,000 if you're 50 or older. Plus, you can make a contribution as the employer, which is a fraction of the profits that your little business makes. So the grand total can be $56,000 this year or $62,000 if you're 50 or older. It's a lot of money that you put aside, and that money is removed from your taxable income. So you don't pay income tax on it, just like contributions to a corporate 401k.
So Jeff, what are some of the big advantages for somebody who's signing up for a solo 401k?
Well, I think there are two. The first one is that you have great flexibility in what you can invest in. It's much like an IRA or a rollover IRA, where you can select pretty much any product that you want, mutual funds, individual stocks, even things that are a little bit out of the ordinary, like master limited partnerships and royalty trusts and things like that.
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