Many wonder, what is a Solo 401k account and how it works. The Solo 401k is a retirement investment plan designed with the small business owner in mind. These are typically individuals who are self-employed and have no additional full time employees other than themselves and/or their spouse.
There are a variety of ways for the self-employed to contribute to a pension plan or retirement fund. But, perhaps none more attractive than that of a Solo 401k plan. Since its arrival, this Qualified Retirement Plan has opened new doors for individuals looking beyond the retirement norms of SEP-IRAs, profit-sharing or money purchase plans.
So what is a Solo 401k exactly?
How does it differ from SEP-IRA’s?
The Solo 401(k) has already eclipsed the Self Directed IRA as the preferred method of retirement investing for small business owners. Now the self-employed can do even more with their money, thanks in part to the Solo 401(k) plan’s larger contribution limits and added ability to borrow cash from the plan at an affordable rate. The Solo 401(k) allows you to contribute more to a pension plan than you could to a SEP (simplified employee pension).
Simply put, the self-directed Solo 401(k) plan allows retirement investors to directly control their investments with little or no restrictions.
Some things you can do with the self-directed Solo 401(k) plan include:
- Mange your own accounts without the hassle and confusion of a middle man
- Avoid certain Unrelated Income Business Tax on leveraged real estate that typically accompanies self-directed IRA
- Contribute higher amounts of money annually than other similar retirement plans
- Borrow up to $50,000 or 50% of Solo 401(k) account value tax-free and penalty free
- Investors have the option to make “after-tax” or Roth contributions by using the salary deferral portion of the Solo 401(k)
- Convert existing retirement accounts into a Solo 401(k)
- Solo 401(k) contributions can be adjusted up/down or skipped completely if business is sluggish
- Freedom to choose alternative investment choices, such as precious metals, real estate, private companies, and foreign assets
- What is a Solo 401k
- Self Directed IRA
- Self Directed Solo 401k
- Solo 401k Checkbook Control