How Solopreneurs Can Take Control of Their Retirement with Sean Mullaney – 334

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If you are (or were) a W-2 worker, your company probably gave you the option to enroll in a retirement account. Ideally, they matched it, managed it, and made it easy for you to sign up and make contributions.

If you’re an entrepreneur, saving for retirement isn’t quite as simple. Which means you’ve got to take control of your own retirement–but this creates additional opportunities to save on taxes and put away more money for the future.

That’s why I’m excited to introduce you to Sean Mullaney. Sean is the president of Mullaney Financial & Tax, a fee–only fiduciary that offers advice-only financial planning. He’s also the author of The Solo 401(k): The Solopreneur’s Retirement Account, a guide that allows self-employed entrepreneurs to reduce taxes and strategically save for retirement.

In our conversation, we dig into how real estate can play a role in your retirement portfolio, the advantages of the solo 401(k), and how to take advantage of the wide array of tools at your disposal that you might not even be aware of.

Disclaimer: The discussion is intended to be for general educational purposes and is not tax, legal, or investment advice for any individual. Josh and the Accelerated Real Estate Investor podcast do not endorse Sean Mullaney, Mullaney Financial & Tax, Inc. and their services.

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Key Takeaways with Sean Mullaney

  • What makes a solo 401(k) such a great investment tool for people with substantial self-employment income.
  • How to make double contributions to a solo 401(k) as both employee and employer.
  • Why most solopreneurs need to work with a solid financial professional to maximize their retirement opportunities.
  • Why investing in your own deals from your retirement accounts is all but guaranteed to dilute your returns.
  • The critical difference between a fiduciary and someone who sells financial products based on commission.

Sean Mullaney Tweetables

“When you work for yourself, you’ve got to be in charge. But with that additional control comes additional opportunity.”


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Josh Cantwell: So, hey, everybody, welcome back. This is Josh Cantwell, your host at the Accelerated Investor podcast. And I’m here today with my guest, Sean Mullaney. Sean is the author of a brand-new book which you can find at Amazon, Barnes & Noble, and everywhere you find your favorite books. The book is called The Solo 401(k): The Solopreneur’s Retirement Account.


Sean is the president of Mullaney Financial & Tax, which is also a fiduciary, a fee-only fiduciary that also offers advice-only financial planning. We’re going to talk a little bit about real estate. We’re going to talk about diversification. We’re going to talk about the markets, and specifically, for those of you who are solopreneurs, about the advantage of the solo (k).




Josh Cantwell: So, Sean, thanks so much for joining me today. How are you?


Sean Mullaney: Doing well, Josh. Looking forward to this discussion.


Josh Cantwell: For sure. So, Sean, tell us about the book. Let’s start with that. Tell us what, when they buy the book, download the book, purchase at Amazon, Barnes & Noble, etc., first of all, let’s talk about why you wrote the book. What was your passion project? And why did you feel in your own entrepreneurial journey, it was time for you to write a book about the solo (k)?


Sean Mullaney: Yeah. So, Josh, I’m both a pusher and a user of the solo 401(k). My answer for everybody, but for so many solopreneur, it’s so impactful and it reflects my own personal journey. So, through age 40 or up to age 40, I was W-2 worker, had a career, big four accounting firms, great, but I always had that itch to go out on my own, to start up my own financial planning practice.


So, at age 40, I pivoted and I started self-employment. And eventually, with that came the solo 401(k). And when you work for a large W-2 employer, it’s great. HR sends you an email. Here’s the 401(k) plan, make an investment election, make a contribution percentage election, and rock and roll.


When you work for yourself, that email doesn’t come from HR. You got to be in charge. You got to go through the financial institutions. But with that additional control comes additional opportunity. And I think for so many solopreneurs, we’re just not aware of this great tax planning opportunity, retirement savings opportunity. And that’s why it was sort of this mesh of solopreneurs need this information, need this education. And I’ve experienced this journey myself.


Josh Cantwell: Got it. Love it. So, if I’m a real estate entrepreneur, let’s say, very similar for a lot of our audience, they have a W-2 job. They decide to invest in real estate on the side and they create an LLC. Inside of that LLC, they’re buying and selling real estate, flipping properties, etc., etc. Maybe they create another LLC where they purchase an apartment building, maybe it’s a 50-unit, 200-unit. And they have another LLC that is basically a one-off LLC just for the purpose of owning and running that apartment building.


And then they take the profits from the apartment building because they have the first LLC, which is essentially their management LLC, if you will. That management LLC through the operating agreement owns the equity, owns a piece of the equity in the apartment complex, but through the flipping, through the wholesaling, maybe it’s realtor fees, maybe it’s the ownership in the apartment complex. A lot of those dollars then fall to their management LLC, and that management LLC has a lot of income, and maybe not a lot of tax deductions.


It would sound like the solo (k) would be a great place to start with that, to take those profits, shove a bunch of them into a solo (k), and then begin to invest in a tax-deferred or a tax-free account. Talk to that for a minute assuming you’re putting your real estate hat on in the scenario that I just described. What would that look like? What’s the benefit of doing it? And kind of what is some of the proper structure?


Sean Mullaney: Yeah. So, in a case like that, I certainly think you need to work with a professional. This is not a DIY-type structuring thing. And you need to make sure that you have good self-employment income in a structure like that. So, without self-employment income, you’re not going to be able to fund a solo (k). It doesn’t mean a structure without self-employment income isn’t the right answer. It just may mean that the solo 401(k) is not readily accessible.


Another thing to think about when you have a solo 401(k) and you have a W-2 job is you need to coordinate the employee contributions between the two accounts. And I see this with side hustlers, too. It may be, hey, at work, we’ve got a great 401(k) and a great employer match, maybe the only thing you do with a solo 401(k) for a side hustle is the employer contribution. That could be one path.


Or you could say, hey, you know what, my work placed 401(k), these investments aren’t so good, the fees are high, but there’s a match. So, here’s what I’m going to do. I am going to make my employee contribution at work to secure that match. Even with a crappy plan in terms of investments, fees, that match is an instantaneous return, really hard to beat that.


So, maybe what we do is we contribute at work to our employee and the employer match level, wherever that is, grab that. And then on our side hustle, what we do is we go and we contribute as an employee and we coordinate those two contributions, the small contribution at work, the larger contribution for our side hustle. Those have to meet the IRS annual limits.


Right now, it’s $20,500, year 2022. It’s $27,000 if you’re 50 or older. Those limits generally go up every year. That’s certainly going to go up in 2023. So, there’s some coordination that needs to happen there and there’s some interplay. So, those things are absolutely out there, but especially if you’re doing real estate, you’re trying to create self-employment income for the real estate. You’re going to very much want to work with a professional.


Josh Cantwell: Sure. So, if I didn’t have the opportunity at work, and now, let’s just say I left the W-2 altogether, I’ve had success in my real estate investments. I leave the W-2, much like you left your W-2, big four accounting firm. You move out and you’re now a true solopreneur earning your profits in real estate. You’re going to have self-employment income qualified for a solo (k) now.


I think there’s some confusion out there regarding, well, who’s the employer and the employee? I’m a solopreneur. Like, I’m kind of both. Just take us down that path and explain that. How does it work?


Sean Mullaney: Yeah. So, when you work for yourself, for solo 401(k) purposes, assuming you’re reporting your income on Schedule C on your tax return, guess what? You’re both the employee and the employer. And so, one of the reasons the solo 401(k) is so powerful because you get to make two different contributions. You can contribute as the so-called employee, and that’s subject to those limits we just referenced, $20,500, $27,000 if you’re 50 or older, plus you get to make an employer contribution.


And here’s where it’s a lot more powerful than the W-2 job. Say your salary is $100,000 as a W-2 employer. They offer 50% match on your first 6% of contributions. Let’s do some math. Always dangerous on a podcast, but that’s you contribute $6,000, 6%, and they match 50%, $3,000. So, it’s a $3,000 employer match. That’s great, right? That’s sort of free money. Not really, but $3,000 is $3,000. That’s real money where I come from at least.


All right, but say now you’re a solopreneur and you make that $100,000 and you report on Schedule C, yeah, we can max out the employee contribution just like the large W-2 401(k), no real difference there. But guess what? Now, we can determine the employer contribution based on the IRS, the Internal Revenue Code limits, and we could go up to over $18,500, just a little bit over that.


And by the way, it’s flexible. So, we don’t have to max it out, but we can. We can max it out for maybe six times more what we could get at a potential large employer W-2 job. So, I think that’s where, Josh, this thing has so much power is because the contribution limits are quite substantial and you’re in control. So, I think that’s just where this thing is so powerful.


Josh Cantwell: So, let’s say, take this one step deeper, and again, I realize the need for tax and legal advice. We’re not making any kind of recommendation here. I want to use that disclaimer. You got to seek your own counsel, but from an education perspective and just the podcast, so let’s say I own a business and I have partners and there are employees in that business, but through the operating agreement, I take my portion of the profit into another LLC, of which I’m 100% the owner of, I’m 100% the owner of this LLC, maybe it’s me and my wife and we participate in these other LLCs, these other apartment buildings with other investors, help me understand some of the testing rules, or do I have to include the employees because the employees work at, let’s say, kind of like an employee holding company, if you will, or kind of a headquarters, if you will?


But my take or my share of the profits from my different investments comes out in the form of my own LLC, of which I am the solopreneur of that company. Do I still have to include the employees? Do I have to include the partners? Help me understand that piece.


Sean Mullaney: Yeah. So, Josh, you’re hitting on a great issue and one that often requires some professional assistance. I have a whole chapter or half a chapter on this aggregation. So, you start with a very basic concept. The solo 401(k) is generally speaking for solopreneur and their spouses. That’s the initial cut.


And in theory, if you have any employees, know that’s right. Now, that said, you can have part-time employees. Current rule is 1,000 hours. Less than 1,000 hours a year, you’re okay. You don’t have to include them. You can still have a solo 401(k). That rule is going to change in 2024 to also include 500-hour employees who have been there for three years. Okay, so you have that piece.


But then you can do a partnership situation. So, let’s say you and two friends form a partnership and there are no other employees and you each own a third. That partnership can sponsor solo 401(k) for all three partners because there’s no employee, there are only owners. And so, we can do the solo 401(k).


But then, Josh, you get to these multiple business issues. So, there are going to be entrepreneurs out there who add this consulting business on the side, and not just me, but then over here, I’ve got five business partners and we’ve got some employees. And oftentimes, you’re going to have to aggregate and you have to say, okay, what we have here is, in my life, in my business life, I do have these employees because I’m a partner over here, and they often look to controlling business interests. And then you have to also do some family aggregation depending on the situation, particularly with spouses. Now, we can hive off businesses with spouses.


So, you do need to look at what are the business interests I own, what are the business interests my children own, potentially, my parent’s own? And then what are the business interests my partners potentially own? And you have to think about that. There are ways to say, okay, I have these two businesses, and even though I wouldn’t qualify for solo 401(k) in one, I still can in the other. But that’s the sort of thing you’re definitely going to want a professional to sign off on because you don’t want to open a solo 401(k) where you don’t qualify, Josh.


Josh Cantwell: Sure. So, really the best time, right? Because I think the goal here for every entrepreneur is you go from W-2 to a solopreneur, you build a business, you add employees, you add partners, these kinds of things. Obviously, there are a lot of people doing side hustles. There are a lot of people investing in real estate as a side hustle or doing some e-commerce as a side hustle or some content creation online – Facebook, Instagram, TikTok, etc., all as a side hustle. And they all get paid for it.


So, the ideal time it would sound like is, hey, I’m leaving that W-2, started my own thing. Maybe we’re starting to like– we pay the bills and we’re growing the business, but it’s still just maybe me and my wife, or just me for the most part, maybe I have some vendors, some contractors, or some 1099 people, but they’re not employees. Now, I can take a big chunk of that, start up the solo (k). Some of it comes from my company. Some of it comes from me. I max it out, build it up, and then I have that.


And then if I add employees down the road, there’s obviously some testing that I have to go through and some different rules and things like that. So, that’s the ideal time to do it. If you’re going to stay as a solopreneur and always have the side hustle, but not a lot of employees and this continues to be a major place to park money, obviously, the bigger your business gets, the more employees you add. Now, we’ve got to test and have all the employees kind of included at some level. But a lot of the guys that are part of this audience, people that I coach, Sean, they’re all those solopreneur types.


So, then it becomes, okay, I set it up. We’ve got to do the annual testing to see how much I can do. And then if I have employees, those kind of things, now, it becomes like, where am I going to invest? And I tell my people, look, if you’re going to go buy an apartment complex, you always want to do it with other people’s money. If you take your money, your cash, or your retirement account and you put any of that in your own deal, it kind of violates one of my personal philosophies, which is you’re now having to put in sweat equity to make passive income to your cash or your retirement account.


And to me, that’s a no-no because if it’s truly passive, like retirement savings should be passive in my opinion, it should be something that you’re setting it, forgetting it, investing in the markets, investing in real estate, private money loans, apartment equity, or some sort of different funds in the marketplace. But if you start to mix them together, you’re having to work in your apartment complexes, in your business to then make a return to make a return on investment in your solo (k). Not only that, but that were obviously some self-dealing rules where lending money or investing money out of your retirement account into your own deals is also a no-no.


So, that’s the first thing I want to get out to my audience is that I firmly believe that you actually dilute your return by investing in your own deals, even if it’s cash. So, first of all, don’t do that. Take your money that’s in your solo (k), and then either invest it in the markets with someone like Sean, somebody who’s a fiduciary, who’s got an obligation to his client not to just sell products with high commissions, but a fiduciary that’s a fee-only fiduciary. That’s what Sean does.


And I want that thing, you set it and forget it and get some of that money away from your real estate investments. One of the biggest mistakes my father made is that he took all of his profits from his business and put them back in his business. And then right before my dad’s retirement, he was diagnosed with Parkinson’s and ended up selling his business for far less than what it was worth at one time, whereas if he had taken some of his profits from his business and put them in a separate account like, say, a solo (k), and then invested them somewhere else outside of his business, he would have had this entirely other different assets that he could have relied on in retirement versus just reinvesting in your business, reinvesting, and reinvesting in your business.


So, Sean, I’m just kind of telling this story about some lessons that I’ve learned. So, I don’t know if you have any additional comments to that, but these are some of the mistakes that I’ve made, my father has made that I want our audience to learn from.


Sean Mullaney: Yeah. So, Josh, look, I’m not here to give anyone investment advice, but I will say as an educational principle, this point you just made around diversification is a very solid point. The idea is let’s not have everything in one basket, everything in one sector. And then, you mentioned, my role, I’m actually an advice-only financial planner through my financial planning firm. And so, folks, don’t invest through somebody like me.


They get advice and then they do the implementation themselves. They find a financial institution. And that’s where a solo 401(k) also sort of comes into play because you have large institutions offering low-cost funds, and the solo 401(k), you think like, wait a minute, 401(k), that’s the thing Apple Computers has. This thing’s going to cost me tons of money. Well, it turns out, actually, no, the brokerages sort of like to have solopreneurs as clients, and they mostly say, hey, we’re going to have a no-fee plan. And then you just pay the fees inside the fund, or maybe there’s a $20 fee per fund, but these fees are actually very manageable.


And then I like what you’re saying, Josh, about hey, the solo 401(k) could be a piece. Hey, maybe I’ve got some real estate investments in my tax bill, just in my own name through LLCs, whatever it might be. And then, maybe I have a side hustle. I have something that is self-employment income. So, then the solo 401(k), I can do relatively diversified investments, and now, I’m getting more diversification and the solo 401(k) could be a mechanism for that.


Josh Cantwell: Right. Yeah, I’m a big believer in not, like you said, putting all your eggs in one basket. I have a lot of eggs in my real estate basket. I have a $300 million apartment portfolio. So, there are a lot of eggs there. But yeah, we’ve got 529 plans and we’ve got retirement accounts and other things that are in the market that we’ve sought financial advice.


I actually have a fee-based financial planner, just like Sean, who’s a local friend of mine. That’s what we’ve done. We’ve paid him to draft a financial plan and help us implement that. And so, to look at projections and tax and some of those kind of things and diversification is very, very important.


Sean, help our audience understand because Wall Street has done a really, really good job of marketing and has done a really good job of explaining to people, get into the stock market, do it through a mutual fund. I’m a firm believer in index funds because you can get similar or better returns with very low fees and very low turnover.


But a lot of people don’t understand the concept of a fiduciary, as an advisor, versus somebody who just maybe sells products that are more beneficial to the firm or to a couple of firms or to the provider, to the mutual fund family or the annuity company, some of those companies that just sell, sell, sell, commission, commission, commission versus a fiduciary that has a fiduciary to the client. I have a fiduciary in my apartments because of my securities background and because of our 506(b) and 506(c) securities offerings. I have a fiduciary to those limited partners that invest in my deals. Help our audience understand, what is the fiduciary. What makes that different than just the financial planner that sells products for a commission?


Sean Mullaney: Yeah. So, a fiduciary is one of those labels out there. And what it means is that the professional is supposed to put the client’s interests above their own. And so, that means that any sort of advice in terms of recommendations, hey, buy this product, you have to look to see, hey, is that in the client’s best interest? And not all advisors necessarily fit that mold or subject to that.


I myself, I’m licensed as a CPA. And so, as a CPA, I owe a fiduciary duty to all my clients. There are other ways to be a fiduciary. There are different credentials out there. And some of those credentials require that folks be a fiduciary. One of these, Josh, I would say to the audience is if you think about engaging a financial professional, have an interview with them. It can be over Zoom or Google meeting or it could be in-person, whatever you want to do, and just ask them some questions about their licensing, their background.


And this fiduciary point is one thing to ask them, hey, are you a fiduciary with respect to me as a potential client? What does that look like? But then I would also say that’s not the only thing you want to be testing for, fit and feel, and just what are the fees? What do I get out of this? And how do we relate interpersonally? That’s going to be very important in terms of a financial planner and a client having a really good experience.


Josh Cantwell: Yeah, fantastic stuff. And I’ll just kind of wrap up, Sean, with this, the book again, Solo 401(k): The Solopreneur’s Retirement Account, is available at Amazon, Barnes & Noble. And I think this comes down to, Sean, I think you’d agree about, first of all, seeking good legal, financial, and tax advice from different professionals in each one of those buckets. And then for me, it was about hiring a financial planner, paying a fee to a financial advisor to help us draft, my wife and I draft the plan. It’s good to have a plan first, someone that’s going to help you follow through on your projections. That’s number one. Plan first.


Then where’s your life dedicated? Because for me, my life is dedicated to my apartment buildings, my real estate, my investments. I watch it like a hawk every day. I have a lot of eggs in one basket and I watch the freaking basket all the time, but I’m not going to put all the eggs in that basket. So, then investing outside of that, investing in the markets, solo (k) could be overfunded. Life insurance is going to be maybe a Roth IRA. Some of these other things that someone like Sean can help you navigate is really, really important because if you’re not going to– those guys that you’ll have a big nest egg and they look at it every day, they watch it every day, and they’re like, I don’t need an advisor because I want to do it myself, okay, it’s a small percentage of the audience.


Most of us have a business life, a work life, a family life, and we want to focus on those things. That’s why a need for a fiduciary financial planner and a solo 401(k) exists. So, I would just want to encourage all of my audience, Sean, to reach out to you, to secure your opportunity to interview with you, talk to you, and see where that goes from there. The financial planning firm website is, we’ll put that in the show notes, M-U-L-L-A-N-E-Y Financial dot com.


And Sean also blogs on a regular basis at Those are the places that you can find Sean and engage with him, and he can help you kind of navigate the waters to make good financial decisions based on your circumstances. So, Sean, listen, I appreciate you writing the book. I know that’s something that’s a passion project for you, going to impact a lot of people. And thanks for carving out a few minutes for us today on Accelerated Investor.


Sean Mullaney: Josh, I really had a great time. Thanks so much.

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