What is a Solo 401 (k)?
A Solo 401(k) is a 401(k) qualified retirement plan that was designed specifically to cover employers with no employees, or that person and his or her spouse. The one-participant 401(k) plan isn’t a new type of 401(k) plan, but it is often overlooked as a retirement-saving vehicle.
What are the eligibility rules?
No age or income restrictions but must be a business owner with no full-time employees.
What are the contribution limits?
The total solo 401(k) contribution limit is up to $56,000 in 2019. There is a catch-up contribution of an extra $6,000 for those 50 or older.
What are some of the advantages of a “Solo” 401(k)?
- You can contribute as both the employer and the employee and take advantage of tax-deductible contributions as the employer and pre-tax contributions as the employee.
- Tax-deferred growth potential on contributions.
- Solo 401(k)’s allow unlimited investing options.
- You can choose between making traditional tax-deductible contributions or after-tax Roth contributions.
- You can move cash into a Solo 401(k) from a taxable investment account, reducing taxable income and getting a tax deferral on future gains.
These benefits are available to only qualified individuals. To avoid tax penalties and disqualification of the Solo 401(k), make sure your business meets the requirements. For more information on self-employment, visit the IRS.
Before you decide which is the best retirement-savings vehicle for you; do your homework and choose an investment provider that offers high-quality, low-cost investment option inside of the individual 401 (k) account.