Solo 401 k for Self Employed – Essential Questions Answered

Solo 401 k for Self Employed

Solo 401 k for Self Employed

Investing in the Solo 401 k for self employed is one of the most lucrative choices for today’s business owners. A secure retirement is what everyone is looking for and the different specifications of the retirement plan promote that. There are however many misconceptions and questions that a person need to know about the self-directed 401k.

Important Questions about the Solo 401 k for Self Employed

Here are some of the FAQs regarding the Individual k retirement plan:

Are you qualified to open a Solo 401k?

There are two eligibility requirements needed for an individual to be able to set up a solo 401k plan.

  • First, you must have a proven self-employment activity. This means that you are working as a consultant, independent contractor, or a small business owner in order to be qualified for the retirement account. Does this mean you cannot have a full time job? You can still have a full time employment as long as you can prove the presence of your self-employment endeavors.
  • Second, you must be without any full time employees hired in your company. The only exemptions for this eligibility requirement are the business owner and his/her spouse.

How much are the maximum contributions?

As of 2015, the maximum contribution for the Solo 401 k for self employed retirement plan is $18,000 as salary deferral. Those who are 50 years old and older could increase their contribution with a catch-up amount of $6,000 for a total of $24,000 yearly.  The maximum yearly contribution must not exceed a total of $59,000. The amount includes an additional 25% for the employer side of contribution.

Is there a loan option in the Solo 401 k plan?

The retirement plan allows plan owners to borrow from their retirement account. Participants are allowed to take out up to 50 percent of the total account value or $50,000. The repayment schedule depends on the date when the loan was initiated and could be repaid during a period of up to five years. Moreover, the loan is required to be paid back in full with the inclusion of the minimum interest rate based on the current Prime. Repayment is made at least on a quarterly basis.

The Solo 401 k for self employed is a remarkable option for qualified individuals. You can definitely see how your retirement savings could multiply and grow with numerous flexible investment options you can finance using your retirement funds.

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