What is a Solo 401k?
If the ‘employees’ in your company consist of no one other than yourself and possibly, your spouse, then a Solo 401k, also known as an Individual(k) plan, has been specifically designed just for you – assuming you plan to maintain this strict limit on employees in the future. The Solo 401k can be established by both incorporated and unincorporated businesses, sole proprietorships, partnerships and LLC’s with no other employees than your spouse, as long as you, the owner, are receiving a salary from the business.
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Advantages of a Solo 401k
More Flexible Than a SEP or SIMPLE Plan
Not only are the tax deferral limits higher through a Solo 401k plan than a SEP or SIMPLE, but the account holder can also take a loan out against the account balance, with certain limitations – an option not available under the other two plans that are popular with small business owners.
The Over Age 50 Advantage
The tax deductible limits for a Solo 401k include a ‘catch up’ provision for those over 50 years of age, which increases the tax advantages even more. In addition, those over 50 can make Roth IRA contributions, up to an established limit, if they prefer; another option not available under the SEP or SIMPLE IRAs.
Disadvantages of a Solo 401k
Limits Business Growth
There is no possibility of adding additional employees to your business with the Solo 401k plan. This can be a limiting factor and must be taken into careful consideration before choosing to establish this type of retirement savings account.
No Retroactive Contributions
Solo(k) plans must be typically established by December 31st, but tax deferrals are not retroactive. You can only receive the tax benefits on contributions made from salaries received after the official establishment date of the Solo 401k plan.
Administrative Costs and Filing
Although administration fees are low, compared to a full 401(k) plan, they do exist and an annual 5500 filing is required when the account reaches more than $250,000 in assets.
Distribution Age Requirements and Penalties
The same age bracket for non-penalty distribution applies to Solo 401k plans as most other tax deferred retirement plans: After 59 ½ and before 70 ½. Distributions must begin by April 1st of the year following the year the individual reaches age 70 ½ and distributions requested before age 59 ½ would incur a stiff tax penalty.
“Provident Trust Group has over $2 billion in assets currently in custody, providing stability and security for all our clients.”
Why Open a Solo 401k with Provident?
Provident consists of a team of highly qualified professionals whose first priority is to service the goals and intents of their clients. Our expertise is set at your disposal.
Complex Transactions Simplified
The Provident approach focuses on simplifying the complex. We make sure that every IRS recording and reporting requirement is met and that our clients fully understand what their options and limitations are in regard to their retirement savings accounts.
All it takes is a phone call, to begin your relationship with the professionals at Provident, though we’d be happy to meet you in person at our Las Vegas office as well.
Give us a call at 888-855-9856. We’d be happy to answer your questions related to retirement savings and investments through a Self-Directed Solo 401k, SEP IRA, SIMPLE IRA , or any other retirement option you are considering.