The Qualified 401k Retirement Plan is one of the most sought after accounts in the industry. Retirement plans are basically designed to help secure your financial future. However, not all retirement accounts are created equal. Some accounts are made with better features compared to others. This is the case with the owner-only retirement account for small business.
In order to have a comprehensive understanding of the Individual k plan, here is your checklist outlining the top reasons why more and more people establish the Solo 401k.
- Tax-Free Benefits – Participants can rollover their retirement plan to the Solo k Roth sub account in order to maximize the tax-free perks. Roth Solo k sub account allows after-tax contribution of up to $24,000 per year. After-tax funds are exempted from any tax restrictions giving you maximum earnings and tax-free withdrawal.
- No Custodian Consents and Fees – If you want to invest your retirement savings, you can do so without any custodian consent and additional charges. The Checkbook Control feature of the self-employment 401k qualified retirement account allows easy access and use of your retirement money as easy as writing a check.
- Diversified Investments – You can increase your earning potentials and growth through a wide range of investment opportunities. The Qualified 401k Retirement Plan savings could be utilized for investment in a wide range of field and industries. You can invest in real estate, precious metals, stocks and bonds, private businesses, mortgage notes, tax liens, tax deeds, and so much more.
Warnings about the Qualified 401k Retirement Plan
Just like any other retirement plans, there are also mistakes and errors you may do which could definitely affect your account and incur penalties and sanctions. In order to keep on enjoying the perks and benefits of the Individual k, these are the things you need to avoid:
- Missed payment of your annual contribution. The maximum contribution limit for employee deferral is $18,000 for participants below 50 years old and $24,000 for age-qualified individuals (50 years and older) which is inclusive of the $6,000 catch up contribution. While there is no penalty for non-contribution, plan owners are recommended to take advantage of the Solo 401k contribution to maximize their savings and tax benefits.
- Engaging in prohibited transactions as stated in the Solo 401k rules. Prohibited transactions include investments using a recourse loan, or using the Solo 401k funds to purchase a house that you live in.
- Non-payment of the self-directed loan. Repayment terms of borrowed amount from the Individual 401 k is Prime Rate + 1% and payable within 5 years.
The Qualified 401k Retirement Plan poses numerous earning opportunities and growth but may also incur penalties if you don’t comply with the rules.
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