Solo 401 K Plan is a retirement plan highly recommended for independent doctors or physicians. Certified medical practitioners often work in an independent contract basis and this could impose certain setbacks especially when it comes to incentives and benefits.
If you are a physician doing tenens work or working as emergency medical doctor, you are classified as an independent contractor. All independent contractors in the medical field are highly advised to take the Solo 401k retirement plan because of its innumerable perks and benefits.
Fundamental Points about Solo 401 K Plan
Here are some of the most important points to remember about Solo 401 K Plan especially in initially knowing more about the plan:
- It is a qualified and certified retirement plan just like profit-sharing and hospital-sponsored plans.
- Solo 401 k Plan basically complies with the different rules and regulatory standards of the IRS.
- Allows plan holders to contribute in their retirement plan on tax-deferred basis.
- Solo 401 k Plan is a pre-approved which is already assessed, scrutinized and approved by the IRS.
- The Plan allows only the plan holder and his or her spouse to be a part and participate in the plan along with its benefits and privileges.
How does it work?
The applicant must first open a solo 401k plan and this application must be filed before the 31st of December. This is necessary so that you can duly and eligibly contribute to your retirement plan for that particular calendar year.
The Solo 401 K Plan is highly advantageous because of its higher contribution limits. The total contribution figure for the plan is $51,000 for the year 2013. This amount is for plan holders who are under the age of 50. However, for plan holders who are 50 years old and above, they could have as high as $56,500 in total contribution value. That’s because contributors who are 50 years old and above are qualified and allowed to have catch up provisions amounting to $5,500 per year. This is already a big and higher contribution amount compared to other retirement plans in the market today. It is imperative to note that Solo 401 K Plan offers higher contribution limits because the plan holders are allowed to contribute in two options. They could contribute as employee or employer whichever could result to a much bigger contribution limit.
With Solo 401 K Plan, independent doctors and physicians are given good financial status and options for their retirement plan.