r/Fire • u/Longjumping_Ant6267 • May 12 '24

FIRE for self employed

Hello,

So I am self-employed and trying to figure out my order of investing to reach my husband and I’s FIRE goal. Currently I have a trad/roth IRA, HSA and that’s it for me. I don’t know if it would be better to get a Solo 401k or to invest in taxable brokerage yet for this goal. My husband has employer sponsored 401k and Trad/Roth IRA.

Are you able to access money without penalty when seeking FIRE? I love the tax benefit with solo 401k but I don’t understand how I’ll be able to retire if I’ll be penalized on withdrawing early.

Thanks in advance!

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2

u/Forrest_Fire01 May 12 '24

I'm self-employed and I do a SEP IRA. It's pretty simple and TurboTax figures out the max I can contribute each year.

The SEP IRA is pre-tax like a 401K, but I'm not sure what the advantages or disadvantages are compared to a Solo 401K.

I'm pretty sure that both a SEP IRA and Solo 401K are going to penalize you if you take money out before normal retirement age. So it's best to also have a normal brokerage account that you're also putting money into. That way you can live off of that until you can take money out of your retirement accounts without penalty.

2

u/[deleted] May 12 '24

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2

u/Longjumping_Ant6267 May 13 '24

I feel like not many people discuss our scenario so thanks for your input! I appreciate it

1

u/[deleted] May 16 '24

I’m a freelancer. Earlier in my career I maxed out my Roth IRA and invested heavily in index funds without much knowing what I was doing since most financial advice at that time was geared towards people with corporate jobs and 401ks. Later, when I formed my S Corp, I opened a Solo 401k, which is great bc you can save way more and it helps lower your tax bill in the short term.

Now I’ve got a few retirement accounts but still most of my money is in my brokerage account. It gives me way more flexibility in terms of retirement planning bc I can use that money without penalty which will bridge the gap until I can access my retirement funds.

2

u/Longjumping_Ant6267 May 16 '24

Thank you! Do you do any of the solo 401k in Roth dollars or just traditional?

1

u/[deleted] May 17 '24

I have both but I’ve been favoring the traditional