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The Solo 401k: A Retirement Plan for the Self-Employed Person - The Solo 401k is designed to solve a very particular problem. What if you work for yourself instead of for another employer? How can you start saving for retirement responsibly and in a tax-advantageous way? This retirement plan allows self-employed people and solopreneurs to have a retirement account so they can build tax-advantaged savings and sleep easier at night. This article delves into what a solo 401k is, who is eligible to participate in it, and how it differs from a traditional 401k plan.

SEP IRA vs Solo 401k: Which Should You Choose? - Working for yourself doesn't mean you have to miss out on the tax benefits that regular employees get from standard workplace retirement plans, though. You have two excellent options: SEP IRAs and Solo 401k plans. Both offer similar benefits, but their few key differences may make one better for you.

How to Pick the Best Small Business 401k Plan Provider - To attract and keep talented employees, it can be a smart move to add a 401k plan to your small business. As a result of the SECURE Act, which was passed in 2019, there are now more opportunities for small employers to offer retirement plans. The law allows small businesses to participate in pooled employer plans, making it easier and less costly for small employers to provide workers with a retirement plan. Here's how to select the right 401k plan provider for your small business.

Safe-Harbor Leveraging for Small Business, Top-Heavy Retirement Plans - 2020 - Many employers are debating how to most efficiently take advantage of the defined contribution limit increase to $57,000. However, few owners of small businesses are aware of the extent to which certain types of "leveraging" are now permitted in qualified retirement plans. The purpose of this article is to illustrate the provisions that allow owners of small businesses to get the most in return for what they are willing to contribute on behalf of their non-owner employees.


Resources

A glossary retirement plan and investment terms available here.


401k Plans for Sole Proprietorships

Regulatory reform now allows Sole Proprietorships to set-up and contribute to a 401k plan. These are often called Solo 401k or Individual(k) plans. A number of vendors are beginning to market specific plans to meet this need.

General Features of a Solo 401k Plan:

Plan Establishment Sole proprietors with no additional employees other than the spouse of the proprietor or partnerships whose only employees are self-employed partners and their spouses.
Trustee and Plan Administrator     Business Owner, Spouse or Partner or any combination, or any other designated third party.
Salary Deferral
Contributions    
Up to $19,500 (not to exceed 100% of pay and no more than $285,000 of pay can be taken into account). Total salary deferral and employer maximum is $57,000.
Catch-up
Contributions
Individuals age 50 or older may contribute an additional $6,500 in salary deferrals beyond the $19,500 which does not count towards the maximum total contribution limit of $57,000.
Employer Contributions Up to 25% of pay (20% for self-employed) to a maximum of $57,000. Salary deferral contributions are also counted towards this limit.
Rollovers Rollovers and transfers allowed from traditional IRA, SEP, Qualified Plans or Keoghs (Profit Sharing, Money Purchase Pension, Defined Benefit), 401k, 403(b) and governmental 457 plans. SIMPLE IRAs are eligible for rollover after two year holding period is met.
Loans Available to all participants, including unincorporated business owners.
Government Reporting IRS 5500-EZ.

 

401k plans are subject to numerous and complex rules, regulations and tax qualification requirements. Be sure to consult with a qualified professional before making any decisions.

 


Information on Small Business Plans

Starting a small business retirement savings plan can be easier than you think. Here are some resources on a varity of retirement plans available to the small business person.

Small Business Retirement Plan Options - 2020 -- This chart compares 4 common types of plan designs often utilized by small employers.

DOL's 401k Plans for Small Businesses

Choosing a Retirement Plan for Your Small Business -- In this piece you will find a chart outlining the advantages of each of the most popular types of IRA-based and defined contribution plans and an overview of a defined benefit plan.

Retirement Plans FAQs Regarding SEPs

FAQs Regarding SIMPLE IRA Plans

SEP Retirement Plans for Small Businesses

Simple IRA Plans for Small Businesses


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