Wealth-building is common with participants of the Profit Sharing Solo 401 k. There are numerous benefits to enjoy if you start investing for your future particularly with the best and most lucrative retirement plan. The Individual k account is fast becoming a popular choice especially for participants who want to see their money grow and multiply through qualified transactions.
How to maximize the Profit Sharing Solo 401 k
Also known as the small company retirement plan 401k, this account has valuable features that could certainly help you with wealth-building ventures. However, before enjoying the different perks of the self-directed 401 k, there are best practices that you must first do in order to maximize the retirement plan:
- Timely Contribution – Never delay or pass your maximum contribution for the Solo 401k retirement plan. According to the 401k rules, the maximum contribution limit as of 2015 is $18,000 for employee or salary deferral. Plan holders who are 50 years old and older could contribute an additional $6,000 as catch up contribution. Including Profit Sharing Solo 401 k maximum contribution limit, participants are allowed to contribute up to $53,000 or $59,000 for 50 year old participants.
- Loan Repayment – Make sure you also repay your loan in a timely and prompt manner if you don’t want to incur charges and penalties. Plan owners are allowed to borrow up to fifty percent of their total plan value or $50,000 whichever is less. The 401k Solo retirement plan offers flexible repayment for a span of five years with the lowest interest rate of Prime Rate +1%. Repayment of the loan is done at least quarterly but borrowers could also opt for a monthly repayment basis.
- Prohibited Transactions – Based on the terms and conditions of the self-employed 401k retirement plan, there are transactions using the retirement funds that are considered prohibited. Engaging in prohibited transactions could incur penalties and charges hence it is important not to venture into such activities. One of the disqualified transactions a participant could have is to purchase a property using a recourse loan. This is prohibited since the account owner could not become the guarantor of the loan using the Solo 401 k funds.
The Profit Sharing Solo 401 k is a lucrative retirement account that offers viable solutions for wealth-building and securing your financial future. Maximizing its features is easy if you abide with the rules and follow the 401k best practices.
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