Financial Advice for Self Employed
                     FINANCIAL PLANNER
https://www.activefinancialgroup.com
The only thing certain in life and business is that it is 
continually changing. Managing that change is 
becoming more challenging in today’s economy. We 
can make planning for your personal or business 
future less stressful by building a solid path to your 
financial goals. Effective financial planning may seem 
overwhelming – from understanding your personal 
goals and values to analyzing current investments, 
cash flow, debt, income taxes, risk management 
needs and more. But at Active Financial Group, we 
believe managing your wealth strategy is more than 
just managing your money. It is about developing a 
customized financial strategy that is unique to you.
FINANCIAL ADVICE FOR SELF EMPLOYED
1. Traditional or Roth IRA
Best for: Those just starting out or saving less than $6,000 a 
year. If you are leaving a job to start a business, you can also 
roll your old 401(k) into an IRA.
IRA contribution limit: Up to $6,000 in 2020, plus a $1,000 
catch-up contribution for those 50 or older.
Tax advantage: Tax deduction on contributions to a 
traditional IRA; no immediate deduction for Roth IRA, but 
withdrawals in retirement are tax-free.
Employee element: None. These are individual plans. If you 
have employees, they can set up and contribute to their own 
IRAs.
2. Solo 401(k)
Best for: A business owner or self-employed person with no 
employees (except a spouse, if applicable).
Contribution limit: Up to $57,000 in 2020 (plus a $6,000 
catch-up contribution for those 50 or older) or 100% of 
earned income, whichever is less. To help understand the 
contribution limits here, it helps to pretend you’re two 
people: An employer (of yourself) and an employee (also of 
yourself).
In your capacity as the employee, you can contribute as you 
would to a standard employer- offered 401(k), with salary 
deferrals of up to 100% of your compensation or $19,500 
(plus that $6,000 catch-up contribution, if eligible), 
whichever is less.
In your capacity as the employer, you can make an additional 
contribution of up to 25% of compensation.
3. SEP IRA
Best for: Self-employed people or small-business owners with no or 
few employees.
Contribution limit: The lesser of $57,000 in 2020 ($56,000 in 2019) or 
up to 25% of compensation or net self-employment earnings, with a 
$285,000 limit on compensation that can be used to factor the 
contribution. Again, net self-employment income is net profit less half 
of your self-employment taxes paid and your SEP contribution. No 
catch-up contribution.
Tax advantage: You can deduct the lesser of your contributions or 25% 
of net self-employment earnings or compensation — limited to that 
$285,000 cap per employee in 2020 — on your tax return. 
Distributions in retirement are taxed as income. There is no Roth 
version of a SEP IRA.
There is a special rule for sole proprietors and single-member LLCs: 
You can contribute 25% of net self-employment income, which is your 
net profit less half your self-employment tax and the plan contributions 
you made for yourself.
The limit on compensation that can be used to factor your contribution 
is $285,000 in 2020.
4. SIMPLE IRA
Best for: Larger businesses, with up to 100 employees.
Contribution limit: Up to $13,500 in 2020 or $13,000 for 
2019 (plus catch-up contribution of $3,000 if 50 or older). If 
you also contribute to an employer plan, the total of all 
contributions can’t exceed $19,500.
Tax advantage: Contributions are deductible, but 
distributions in retirement are taxed. Contributions made 
to employee accounts are deductible as a business expense.
Employee element: Unlike the SEP IRA, the contribution 
burden isn’t solely on you: Employees can contribute 
through salary deferral. But employers are generally 
required to make either matching contributions to 
employee accounts of up to 3% of employee compensation, 
or fixed contributions of 2% to every eligible employee. 
Choosing the latter means the employee does not have to 
contribute to earn your contribution. The compensation 
limit for factoring contributions is $285,000 in 2020.
5. Defined benefit plan
Best for: A self-employed person with no 
employees who has a high income and wants to 
save a lot for retirement on an ongoing basis.
Contribution limit: Calculated based on the benefit 
you’ll receive at retirement, your age and expected 
investment returns.
Tax advantage: Contributions are generally tax 
deductible, and distributions in retirement are 
taxed as income. An actuary must figure your 
deduction limit, which adds an administrative 
layer.
                       Active Financial Group
         Website: https://www.activefinancialgroup.com/
Office  One
Address:  1300  Ridenour  Blvd,,  NW
                                  Suite  221
                                  Kennesaw,,  GA  30152
Email:  
[email protected]
Phone  No:  
(678)  574-0080
                   Office Two
Address: 2207 Spalding Drive
                 Atlanta, GA 30350
Email:
[email protected]
Phone No:
(770) 797-5788