Chicago is one of those cities that always have something to offer to investors. From real estate market to new businesses opening every day, it is understandable that investors would like to diversify their portfolio. A Chicago Solo 401k plan presents the ideal investment vehicles for small business owners and independent contractors. It is considered by many as the most powerful retirement plan with many unique benefits.
The Chicago Solo 401k is one of the qualified retirement plans under ERISA – the 1974 Employment Retirement Income Security Act. This plan is regulated by the federal government.
Plan holders of a Chicago Solo 401k can enjoy some unique features that the plan offers:
1. Generous contribution limit:
In 2014, account owners of Chicago Solo 401k plan can contribute as much as $52,000 annually. For those who are over 50 years old, the limit including catch-up contribution is set at $57,000.
2. Contribute before or after-tax amounts:
A Chicago Solo 401k plan can receive either tax-deferred contribution in a regular account, or after tax contribution in a Roth account. Roth contribution is only limited to the combined total of salary deferral, maximum of $17,500 in 2014, and the catch-up contribution limit, which is $5,500 for 2014. With a Roth account, small business owners can choose to pay tax first and let their money grow tax-free.
3. Bank account of your choice:
A Chicago Solo 401k plan can have an account at any bank or credit union of your choice. Banking is quite easy and convenient with this retirement plan.
4. The use of non-recourse financing is allowed
There is no tax or penalty charge for a Chicago Solo 401k plan to use non-recourse financing to purchase a real estate investment. This is a great advantage that is not available for many other retirement plans.
5. Loan option for Chicago Solo 401k plan
A Chicago Solo 401k allows its plan participant to borrow from the retirement funds. The loan is penalty-free and limited to 50% of the account’s total value or $50,000, whichever is less. As long as the principal and interest are paid back within 5 years following the loan terms, there will be no tax charge either.
In a vibrant market like Chicago, investors always have to stay on top of the trends and take advantage of all the tax benefits they can get. A Chicago Solo 401k will give small business owners and independent contractors a powerful tool to grow their retirement funds effectively and securely.