Why the Best Retirement Plan for Self-Employed is a Solo 401K

Best Retirement Plan for Self-Employed

Best Retirement Plan for Self-Employed

One of the most important concerns that most self-employed citizens have is being able to ensure financial stability come their retirement years. Of course, the solution to this concern is to find the best retirement plan for self-employed individuals. If you do your research well, you will be able to find out that there are several retirement plan types that one can choose from, such as an SEP or a Simplified Employee Pension, the Savings Incentive Match for Employees, Profit Sharing Plans, Money purchase plan, defined benefit plans, the Keogh plan and the famous 401k plan.

What is a 401 (K)?

A solo 401k is also referred to as a self-employed 401k; specifically designed for those employers who do not have full-time employees excluding the actual businessmen and their spouses. The main idea behind this retirement plan is for employees to really save up for their retirement without the need to pay taxes for the amount until their reach retirement age. So how does this work? Well, it does not necessarily require the employee to make full contributions since both they and their employer can share the responsibility of contributing money to the account. This is why it is considered to be one, if not, the best retirement plan for self employed and even those who have permanent employment.

Best Retirement Plan for Self-Employed: Benefits of Individual 401K

Considered to be an ideal retirement plan for the self-employed, an individual 401k offers significant advantages and benefits such as:

  • Checkbook Control โ€“ just like a self-directed IRA account, an individual 401k account holder also has the option to take on the checkbook control. It allows the account owner to really manage his or her assets and investments well, without the need to hire or acquire the expertise of a custodian.
  • Higher Contribution Limits โ€“ compared to the traditional IRA, wherein the maximum contribution is only at $5,500, a solo or individual 401(k) allows as much as $59,000 as contribution on a yearly basis. Those under the age of 50 can contribute $18,000 based on an employee salary deferral policies.
  • Diversify your investments โ€“ most people think that going for a 401K will limit their investment options, however, having a solo-401k will allow account holders to acquire or invest on real estate, precious metals, tax deeds and liens and even foreclosure properties. It can also be used to invest on stocks, bonds and raw land.

Solo 401(K), the best retirement plan for self-employed will not only allow you to create a better future for you family, but will also option new doors and investment possibilities to increase your account earnings.

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