Benefits Of Solo 401k Plans

Benefits of Solo 401k Plans

by

Edmond Dillard

Nearly everyone feels overwhelmed due to the productive management of retirement plans. It would definitely be an achievement which gives you an astounding lifestyle in the future. Benefits work hand in hand with delicate rules and regulations in all retirement plans. Before considering a certain retirement plan, you must fully understand all the twists and turns. This article points out the advantages that are intended for self-employed individuals.

Solo 401k plans for self employed as well as other plans like SIMPLE IRA (Individual Retirement Account) and SEP (Simplified Employee Pension Plan) IRA are usually considered by sole proprietors. Many investors are interested in Solo 401k plans because of the wonderful benefits they offer. You might be asking what these benefits are. Each of these would be discussed one at a time.

Before anything else, let me give you background information about Solo 401k plans. This plan is typical for individuals who are self-employed or sole proprietors, individual contractors, and also for small businesses. Any business establishment having no employees could participate in Solo 401k. For self employed individuals, advantages are almost similar with self directed IRA accounts. In a Solo 401k however, account holders do not need to hire custodians as well as make account custodian fees. Other plans require custodian fees that reach up to $50 a year which depend on the custodian s level of performance.

In addition, Solo 401k pans require high contribution limits. The contributions could be as high as $49,000 and individuals over 50 years of age have the option to make catch-up contributions of $5,500. Other plans however allow the amount of $5,000 monthly contribution with a yearly catch-up contribution of $5,500. Account holders are privileged to let their spouses make contributions to this plan. This could be done if the spouse also receives any form of compensation from the business.

There is a broad list of investment opportunities you could get in a Solo 401k which is another advantage you could get. Other plans permit investments in mutual funds, stocks and bonds. In a Solo 401k on the other hand, additional investment assets namely precious metals and real estate could be taken aside from the mentioned assets. The two common investment assets that are not allowed in most retirement plans are collectibles and life insurances. This is the general rule in most retirement plans. You are the manager of your account so this means you have total control over your choice of investment.

Additionally, taking up loans from a Solo 401k plan is allowed wherein you could borrow as high as $50,000 or up to 50% of your total funds, whichever is lower. The lowest interest rates are applied in this loan which is about 3.25%. Personal affairs like paying debts or funding your business could be the reason for taking out the loan.

Be reminded that you are the account manager of your Solo 401k. Self employed individuals are the only person to blame thus; you must have a very wide knowledge about the account details. You do not have account custodians who normally process every transaction done in the account as well as providing you with assistance in every decision you make. Thus, financial advisors must be acquired to ask Solo 401k advice. They would then review the business cash flow. Indentifying which plan is best would be acquired however, do not stop just yet. Grasp as much information as possible for you to have a better understanding about this plan.

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