Self-Directed 401 k Contribution: A Guide for New Retirement Investors

Self-Directed 401 k Contribution

Self-Directed 401 k Contribution

Upon establishing the retirement account, plan participants need to know and understand the basics such as the Self-Directed 401 k contribution. A lot of people want to secure their financial future and the 401 k Self-Directed plan is the best option in today’s world. According to the Solo 401 k experts, the retirement plan is better than many others available. For instance, there is proof that the SEP vs. Solo 401 k comparison would always come out with the latter winning the competition.

Detailed Information about the Self-Directed 401 k Contribution

The Individual k retirement plan is available for eligible participants particularly the self-employed and small business owner. The self-employment 401k retirement account is for individuals who can prove their self-employment activities. Before you comply with the Self-Directed 401 k contribution, you need to show that you are working as an independent contractor or consultant from which you generate income to fund the 401k plan.

The 401 k account is also referred to as the small business 401k retirement plan. Small business owners must have no fulltime employees except them and their spouse in order to qualify for the account. Once you have complied with all these requirements, you can now explore the Self-Directed 401 k contribution requirements.

There are two main categories or types of contribution that would determine your plan’s maximum contribution limit:

Salary Deferral

The employee salary deferral Self-Directed 401 k contribution limit is up to $24,000. This amount is already inclusive of the $6,000 catch-up contribution. The catch-up amount is allowed for plan participants that are 50 years of age and older.

Profit Sharing

In this type of Self-Directed 401 k contribution, plan participants can contribute depending on the business type they own or operate. For instance, you can contribute 20% of your compensation if your business is sole proprietorship or single-member LLC. For partnership and multi-member LLCs, 25% of the company compensation is allowed for the Self-Directed 401 k contribution. The total combined contribution of salary deferral and profit sharing elective is $59,000.I If the participant’s spouse chooses to make another contribution to the same account, their combined maximum contribution limit is up to $118,000.

The Self-Directed 401 k contribution is by far one of the highest in the retirement plan niche today. Your huge retirement money could still go a long way especially if you invest your funds on viable and lucrative investments such as real estate.

Related Keywords

.           Self-employment 401k retirement account

.           Small business 401k retirement plan

.           401 k Self-Directed plan

.           SEP vs. Solo 401 k