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The Solo 401 k Plan – Important Facts for Better Investment

The Solo 401 k Plan
The Solo 401 k Plan

The Solo 401 k plan is also known as the One Participant Retirement Plan which is specifically designed for small business owners and self-employed individuals. The plan is a practical and affordable way to accelerate and grow our retirement savings. In order to best use and maximize the benefits of the Individual k plan, plan participants need to know the answers to some basic questions regarding the Solo 401 k plan.

Solo 401 k Plan Eligibility

According to the Solo 401 k plan rules and regulations, self-employed individuals and small business owners are qualified to establish and enjoy the features of the Owner-Only 401 k. Self-employed individuals are consultants, freelancers, and independent contractors. A plan participant can certainly have a fulltime job as long as he can prove his self-employment status.

The Solo 401k plan on the other hand is for  those running a business without any fulltime employees except for the owner and his/her spouse. According to the IRS by-laws, a full-time worker renders more than 1000 hours of work time per year.

401 k Investment Options

The Solo 401 k plan allows numerous options for investment and wealth-building. A plan participant can use his retirement funds to invest in real estate, precious metals, hard-money lending, private businesses, foreign currencies, and stocks and bonds. Diversification of investment means countless ways of earning and boosting your retirement savings.

Solo 401 k Limits

Based on the updated Solo 401 k plan contribution limits, the employee deferral yearly contribution is $18,000. Plan participants who are over 50 years old may contribute an additional $6,000 catch-up value to make his annual contribution up to $24,000. For the profit sharing contribution option, participants can contribute up to $59,000 inclusive of the $6,000 catch up amount.

Loan Options

Plan participants are allowed to borrow up to 50 percent of their total Solo 401 k plan value or $50,000, whichever is less. The repayment requirement is within 5 years on at least a quarterly basis. Borrowers must pay back the interest rate to the account which is Prime Rate + 1 percent. The borrowed amount can be used at the discretion of the borrower.

The remarkable features of the Solo 401 k plan makes this retirement plan a highly recommended option for all retirement investors. Establish a Self-Directed One Participant account and reap the benefits of saving your hard-earned money and using the funds in lucrative investments.

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