A retirement plan for business owners who do not employ any staff is referred to as a solo 401K. In order to be eligible for the Solo 401K plan, you must be the sole owner of the business, although there is a possibility that a spouse can also be included in the plan. It is also necessary that you must also not be expecting to employ any other staff in your business in the future.
How much contribution you can make to the plan a year?
You are allowed to contribute up to 40,000 US dollars (USD) a year to the Solo 401K plan. If you are aged 50 or over, then it is allowed that you can make a 2,000 USD catch-up contribution. No further contributions are permitted except for the 2,000 USD catch-up allowances, once you have reached your 40,000 USD yearly contributions.
Benefits to the Solo 401K retirement plan
You can have many benefits from the Solo 401K retirement plan. You might be eligible to take out a loan. If already you have 100,000 USD in the plan, then you are able to apply for a 50,000 USD loan.
You are also allowed to deduct your Solo 401K contributions from your taxes, and then the Solo 401K investment will build on a tax-deferrable basis. The tax savings when using a Solo 401K are very substantial indeed, depending on your yearly income.
Trustee is required for a Solo 401K plan
In implementing a Solo 401K plan there is a great deal of responsibility. A trustee must be designated for holding the assets for you. You can also act as your own trustee, but if you want to do this then it requires a lot of careful planning. A detailed plan must be put into place, having certain rules and guidelines set out stating how the plan will operate. There are standard plan documents that are available for you, and you can take into account the cost of these when setting up your plan.
It is a new and less common retirement plan
The Solo 401K is a relatively new and less common retirement plan, and so it is not commonly offered by many financial establishments. At the moment the best research for the Solo 401K plan can be conducted through internet. In this way, you should be able to find those businesses that are offering this type of plan.
Fees charge by financial businesses
For setting up the account a one-time fee is charged by most of the financial businesses that offer this service. There will more than likely also be an annual maintenance fee, but that depends on the variety of service that you wish your provider to perform. If you can perform some of the services yourself, such as accounts and bookkeeping, then your annual charge could be considerably lower. As with all financial investments, you need to make sure you gain business quotes from a few advisors before investing any of your money.
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