Setting up a 401k retirement plan is one of the wealth-building tools for most people. Several small business owners and self-employed individuals have seen how this retirement plan maximizes their retirement savings. It is essential to know the Individual 401k rules in order to get the most out of the Self-directed Solo 401 k.
Are you qualified to open a Solo 401 k?
One of the many important things to consider is the qualification requirement of the Individual 401 k. This retirement plan is open to individuals who are:
- Small Business Owners – Business owners are qualified to establish the Self-Directed 401k. Small business means there are no full time employees in the company other than the owner and his spouse.
- Self-Employed – Proof of self-employment must be provided before opening the Solo 401k. Participants need not give up their full time jobs as long as they can prove their self-employment activities. You are self-employed if you are an independent contractor or consultant.
Advantages of Setting Up a 401k
Among retirement plans for self-employed individuals, the Solo 401k retirement policy offers several upsides and benefits such as the following:
- Checkbook Control – Participants have easy access and control of their assets and retirement funds. There is no need for a trust company or institution that will stand as the plan trustee. Using your retirement money for investment is as easy as signing a check.
- Flexible Investment Opportunities – Plan holders could choose from a wide array of investment options. Participants could invest their retirement money in real estate, stocks and bonds, mortgage notes, tax deeds, tax liens and many others.
- High Contribution Limits – Setting up a Solo 401k offers an opportunity to have the highest contribution limit compared to other pension plans. As of 2015, the total salary deferral for participants not older than 50 years old is $18,000. Those who are 50 years and older could add $6,000 as catch up contribution.
- Loan Option – While it is not highly recommended to borrow money from the Solo 401k pension plan, participants could do so when the need arises. Borrowers could loan from their retirement plan 50% of their total account value or up to $50,000.
Setting up a 401k retirement plan is simple and hassle-free. It offers a wide range of benefits from its numerous features. Best of all, it provides the best opportunities to maximize your retirement money through wealth-building investments.
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