Having the productive management of retirement plans cause nearly everyone to feel overwhelmed. It would definitely be an achievement which gives you an astounding lifestyle in the future. Benefits are offered in every retirement plan goes hand in hand with delicate rules and regulations. You must have a better understanding as to how a specific plan works before considering taking part in it. 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. A Solo 401k plan catches the eye of investors due to the great benefits it provides. You might be asking what these benefits are. These would be discussed shortly.
Before anything else, let me give you background information about Solo 401k plans. This plan is perfect for self-employed individuals or sole proprietors, small businesses, and individual contractors. Any business establishment having no employees could participate in Solo 401k. For self employed individuals, advantages are almost similar with self directed IRA accounts. The only difference is, a Solo 401k holder need not hire account custodians or pay account custodian fees. For other plans, these fees range from $20-$50 depending on the custodian's level of performance and experience.
Furthermore, there are high contribution limits in a Solo 401k plan. It reaches up to $49,000 per year and you could make a catch-up contribution of $5,500 if you are over 50 years of age. Unlike other plans, they allow the amount of $5,000 as the maximum contribution per month with a catch-up contribution of $5,000 per annum. This plan allows the spouse of the account holder to make contributions as well. As long as the spouse receives any form of compensation from the establishment, these contributions could be made.
Another advantage you could get in a Solo 401k is the broad list of investment opportunities. 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. As the general rule of most retirement plans, there are two types of investments that are usually prohibited namely life insurances and collectibles. You also have total control over you investment because you are the manager of your account.
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 possible interest rates are applied. This could be as low as 3.25%. The reason for taking out the loan could be due to payment of debts, funding your business or any personal agenda.
Remember, you are the boss of your Solo 401k. Self employed individuals must be very knowledgeable about the plan since you are the only person to blame in case the account fails. There is the absence of account custodians who usually process all the transaction done in the account even provide assistance in every decision you make. Hence, you could seek a Solo 401 advice from financial advisors to review the cash flow of the business. This would you to identify which plan is best for you however, do not end it there. Grasp as much information as possible for you to have a better understanding about this plan.
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. A Solo 401k plan catches the eye of investors due to the great benefits it provides. You might be asking what these benefits are. These would be discussed shortly.
Before anything else, let me give you background information about Solo 401k plans. This plan is perfect for self-employed individuals or sole proprietors, small businesses, and individual contractors. Any business establishment having no employees could participate in Solo 401k. For self employed individuals, advantages are almost similar with self directed IRA accounts. The only difference is, a Solo 401k holder need not hire account custodians or pay account custodian fees. For other plans, these fees range from $20-$50 depending on the custodian's level of performance and experience.
Furthermore, there are high contribution limits in a Solo 401k plan. It reaches up to $49,000 per year and you could make a catch-up contribution of $5,500 if you are over 50 years of age. Unlike other plans, they allow the amount of $5,000 as the maximum contribution per month with a catch-up contribution of $5,000 per annum. This plan allows the spouse of the account holder to make contributions as well. As long as the spouse receives any form of compensation from the establishment, these contributions could be made.
Another advantage you could get in a Solo 401k is the broad list of investment opportunities. 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. As the general rule of most retirement plans, there are two types of investments that are usually prohibited namely life insurances and collectibles. You also have total control over you investment because you are the manager of your account.
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 possible interest rates are applied. This could be as low as 3.25%. The reason for taking out the loan could be due to payment of debts, funding your business or any personal agenda.
Remember, you are the boss of your Solo 401k. Self employed individuals must be very knowledgeable about the plan since you are the only person to blame in case the account fails. There is the absence of account custodians who usually process all the transaction done in the account even provide assistance in every decision you make. Hence, you could seek a Solo 401 advice from financial advisors to review the cash flow of the business. This would you to identify which plan is best for you however, do not end it there. Grasp as much information as possible for you to have a better understanding about this plan.
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