SteveWasiura , You are right, for many small business owners the true investment is in thier own company, but in the future you will reach a point where it is a good idea to put some extra money away and get that write off.

In addition, all 401k plans allow you to borrow up to 50% and pay your self back over time--so the money is not as tied up as you think.

Stephen, you have a really neat product-that firefly look would be a neat addition to my landscaping in the summer...Small business owners are the greatest!

Aaron

Well first, money contributed to a retirement plan is pre-tax for the employee or 100% tax deductible for employer contributions. (in solo(k) the employer and employee can be the same person), so that’s a big benefit to using a plan in addition to what you are already doing.

Pre-tax contributions are taxed as ordinary income when a distribution is made but loans are not taxed…; Participants (employer/employee for solo(k) plans) may take up to a 50% loan and payback with interest (interest paid to yourself) over a maximum 5 year period (depends on plan document). In addition, since there is now a Roth provision (allows after-tax contributions to grow tax-free) in most (depends on plan document) 401k plans the distribution of the principal portion is treated similar to a Roth IRA.

However, there are definitely advantages to owning stocks that pay dividends at a reduced tax rate outside of a retirement plan; also, you may find that a managed portfolio of Municipal ETFs can provide tax-free income, which can be a good use of your taxable money, but it depends on your situation.

I hope this answers your question, and I may have raised a few extra!

This is not meant as advice, advice is given on a one-on-one basis and this discussion is meant to be general in nature to help those that have some questions in general. If you have specific questions please feel free to email me at aaron@smithadvisor.com or visit my profile to see more.