There are many retirement plans for self-employed individuals however in the past years, the Solo 401k is known as the top lucrative choice. The overwhelming benefits of the single-participant 401k are the reasons why it has become a popular option in the pension plan industry. Establishing a Solo 401 k retirement plan is vital for wealth-building because of its numerous advantages compared to traditional IRA-SEP plans.
Are you eligible for the retirement plans for self-employed individuals?
As one of the top, the Individual 401k pension plan ideal for qualified participants. In order to open an account, it is important that you have the following qualifications:
- No full time employees for small business owners. As a business owner of a small scale company, you must not have full time employees other than yourself and your spouse. The Self-directed 401k retirement plan also exempts employees from the coverage particularly those who record less than 1,000 working hours per annum.
- Proof of self-employment ventures. Participants do not necessarily have to be part-time employees only. You can still have a fulltime job as long as you can prove you have self-employment activities. Self-employed individuals are those who work as consultants or independent contractors.
What makes the Solo 401k better than other plans?
Participants could choose from among pension plans for self-employed individuals. However, the Individual 401k pension plan is better than others for a number of reasons:
- Checkbook Control – This feature makes using your retirement money easy and hassle-free. Investing your money in different wealth-building ventures is as easy and fast as signing a check.
- No Custodial Fees – The plan owner acts as a trustee thus there is no need for an independent custodian. This feature cuts additional expenses such as custodial fees and related charges.
- High Contribution Limits – The Individual 401k contribution limits are almost 10 times higher than traditional IRA plans. The salary deferral contribution limit as of 2015 is $18,000 for participants below 50 years old. Plan owners who are 50 years old and above are entitled of an additional $6,000 as catch up contribution. With the inclusion of the profit-sharing contribution, the total yearly contribution limit for participants above 50 years old is $59,000.
Nowadays, planning your financial future particularly for your retirement years even while in your 20s is a wise decision. The Solo 401k self-directed plan is the top choice among retirement plans for self-employed individuals.
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