After the recent economic meltdown, a large number of small business owners incurred overwhelming debts. These business owners are finding it difficult to manage to pay-off-debt, in this tough economic situation. If you’re in a similar situation, then opt for using Solo 401 K Plan Rules to your advantage to help eliminate your financial woes. A Solo 401 K Plan is available to all self employed individuals and small business owners who do not have full time employees. Therefore, you can use Solo 401 K Plan to get rid of debt faster.
Account holders can access up to $50,000 (or 50% of their Solo 401 K Plan balance, whichever is less) using loan feature in order to pay off any outstanding high interest debt. One of the most important benefits of the loan feature plan is that it is tax free and penalty free. It can help the small business owners to eliminate their financial woes with ease.
You can take out loan against this retirement fund, and you can easily pay off your debts on your own. An individual can work hard to pay back the money in his own retirement account.
The program is really simple to use. A self employed individual or small business owner can borrow against total accumulated account balance that they have accumulated within the plan. The loan has to be paid back within five years and payments to be made quarterly at a minimum.
Solo 401 K Plan Rules Offer Additional Benefits
- Truly self-directed: Manage your own account without the need of hiring custodian. This results in big savings on custodian fees and eliminates the delays associated with the custodian.
- Significantly higher contribution limits compared to other retirement plans: $51,000 for the year 2013 (doubled if spouse is involved in the business).
- Avoid the UDFI (unrelated debt finance income) tax that is applicable within a self directed IRA.
- Participate in Roth contribution despite of being not eligible for a Roth IRA due to high income.
- Ability to easily transfer your existing retirement funds into your Solo 401 K Plan.
If you are small business owner or even a full time employee working for someone else, but have self-employment activity on the side, consider these valuable points when choosing your retirement plan.