Individual 401(k) Plan
If you own a business, one of the ways you can invest for retirement is through an Individual 401(k)—also known as an “Individual(k) or “Solo(k).” Unlike other small business plans, an Individual 401(k) is suited for business owners who do not have full-time employees other than their spouse.
An Individual 401(k) allows you to invest in time-sensitive, alternative investments such as rental properties, tax liens, private mortgages, and precious metals. These investments could potentially increase the value of your account.
The investment income in this type of account grows without having to be included in annual taxable income of the Individual 401(k) owner, unless the contributions and investments are held under the Roth portion of the plan.
Contributions made to the plan have the potential to provide the account owner with a tax-deduction equivalent to the amount of the contribution made into the account each year. This potential tax benefit is subject to government guidelines.
When funds are withdrawn from your account as a distribution, taxes may be due—however, in retirement, you could find yourself in a lower tax bracket than when you were employed. This means that you could have a lower tax liability on those funds.
Key Features
- Tax-deferred
One of the most notable benefits to a Individual(k) plan is the fact that funds are tax-deferred while in the account. That means that any money you contribute into your Individual 401(k) account is also tax-deferred until withdrawn.
- Tax deductible
The contributions you make to your Individual(k) plan may also be tax deductible, provided you meet certain requirements.
- Tax-free component
Up to $22,500 of your contributions can be Roth or after-tax contributions. Roth contributions may grow tax-free instead of tax-deferred if certain requirements are met.
- Personal loan availability*
Individual(k) plans allow for you, the account owner, to take a loan from the 401(k) up to 50% of the value of the plan, or $50,000, whichever is less.
- Catch-up contributions
If you are age 50 or older you can make an additional catch-up contribution of $1,000— up to a total contribution of $7,500—to your account.
NOTE: Please visit www.irs.gov for complete rules and regulations regarding SIMPLE plans. Certain restrictions apply regarding prohibited transactions.
*Refer to IRC Sec 72(p)(2)(A) as a source for additional details concerning loan availability.
It’s easy to get started investing in a Individual(k) plan. Open an account in just a few minutes on our online portal.
Frequently Asked Questions
about Individual(k) plans
What are the fees for opening an Individual(k)?
Most custodians of traditional assets collect fees and/or commissions based off of the amount of trades or recommendations of investment choices. Provident Trust Group offers a flat-rate annual fee.
View our fee schedule for full, transparent breakdown of our fees.
What is the maximum loan that can be taken from an Individual(k) account?
Generally, a loan can be taken from a 401(k) account for no more than $50,000 or 50% of the current vested account balance (whichever is less). Please visit Retirement Plans FAQs Regarding Loans for more information.
What is the maximum allowable contribution?
Our COLA limits document provides a comprehensive overview of how much you can contribute to your Individual(k) account.
