Solo 401k is a qualified retirement plan for employers who have no full-time employees except business owners and their spouses. This 401k plan allows employees to save money for retirement age by making contributions towards the 401k funds and thus need not to pay the taxes until they reach their retirement age. Both employers and employees can make contributions to this plan. It is different from general 401k and does not follow the rules of the Employee Retirement Income Security Act (ERISA). This plan receives the same tax benefits as the general 401k plan.
Eligibility
Contributors must be an American and at least or equal to 25 years of age. Any kind of business such as sole proprietorship, limited liabilities and corporations can establish a solo 401k account. Employers including business owners and their spouses, self-employed individuals and non-fulltime workers are eligible for this plan. For self-employed individuals, they must claim a self-employed income and must not work for an employee more than 1000 hours per year.
Types of Solo 401k
Based on the documents required for Solo 401k retirement plan, it is classified into two types.
1. Brokerage Based Solo 401k – This plan only allows investment in market based assets such as Stocks and Mutual Funds.
2. Self-directed Solo 401k or Checkbook control Solo 401k – This plan allows greater number of investment methods including alternative assets such as Real estate, Private business. It includes loan option facility and Roth deferral facility.
Contribution Limits
In this plan, the contribution is made by both employer and employee. The total contribution limit for the people who are 50 years old or more cannot exceed 56,000 dollars.
Elective Deferral – The Employee decide the contribution amount. One can make 100 percent of compensation with the catch-up contribution limit of 19,000 dollars and for people who are above 50 years of age has the limit of 25,000 dollars.
Non-Elective Contribution – The Employer decide the contribution amount. A total of 25 percent compensation can be deferred and can make profit sharing contributions from the company
Where to Get a Best Solo 401k Retirement Plan?
Many investment advisors are there to provide a Solo 401k retirement plan. But, it is suggested to get an opinion from relatives, friends or reading the reviews of the company. One of the best investment advisors is Sprout IRA. They help individuals to find the best investment account and can make the setup process simple. Also, they can easily move old account to the new Solo 401k account and control all of your invested amounts in alternative assets. For more details about the solo 401k retirement plan, visit their website at https://sproutira.com/
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