Self-Employed 401k Retirement Plan – Guide for Plan Applicants

Self-Employed 401k Retirement Plan

Self-Employed 401k Retirement Plan

The Self-Employed 401k retirement plan is a popular and highly preferred type of pension plan. It is a very lucrative form of investment especially for individuals who want to see their retirement savings grow. For applicants of the 401k retirement plan 401k, there are essential details and facts to learn and understand.

How to Establish the Self-Employed 401k Retirement Plan

The Solo k retirement plan is easy to open and establish as long as you are a qualified applicant. Here are the eligibility requirements to comply with:

  • Self-Employment Activity – Plan applicants must prove their self-employment activities. Self-employed individuals are those who work as independent contractors or consultants such as real estate brokers and doctors. Participants may still have a fulltime job as long as they have proof that they are also self-employed.
  • Small Business Ownership – Applicants of the Solo k must be a small business owner with no full time employees. The exemption to this requirement is the business owners and their spouses.

What is a Solo 401k Roth Account?

The Roth sub account allows the participant to make after-tax contribution to his retirement plan. This allows the plan owner to enjoy earning income and revenue using his retirement savings without any tax restrictions. Moreover, certain investments could be made which could generate income and profits and the earnings have tax-free privileges. This means tax will not be applicable when the amount is withdrawn.

How to Avail the Solo 401 k Loan

It is not highly advisable to borrow money from the Individual 401 k plan. However, participants could absolutely do so when the need arises. Borrowers are allowed to loan up to $50,000 from their retirement plan or 50% of the total balance of their account. The loan option of the Single-Participant 401k is flexible when it comes to repayment. Borrowers are given up to five years to repay the loan and could pay on at least a quarterly basis. The interest rate is Prime Rate+1%. Moreover, there are no penalty charges incurred when you borrow from your retirement funds. Fines are only applied if the borrower failed to repay in the given time frame for repayment.

There are many other benefits and commendable features that the Self-Employed 401k retirement plan offers. The Checkbook Control feature guarantees easy access and use of the plan owner’s retirement savings. It also makes using your retirement money as easy as writing or issuing a check.

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