We’ve talked about a SIMPLE IRA, but depending on your situation, there may be a better retirement plan for you.  As we continue our exploration of lesser known retirement options with benefits you may not be aware of, we next focus on the solo 401(k) plan which is suitable for Individuals or Couples who own a business.


What is a Solo 401(k) Plan?

A Solo 401(k) plan is a 401(k) plan for a self-employed individual, partnership, or a business owner with no employees.  In general, a spouse who is an owner or employee of the plan sponsor may also participate.

What are some advantages?

  • Same contribution limit as a full 401(k) plan – For 2016, contributions of up to $53,000 or up to $58,000 if over age 50.
  • Flexible Annual Contributions – Solo 401(k) employer contributions can be increased, decreased or stopped from one year to the next without cost or penalty.
  • Tax Deductible Contributions – Whether incorporated or not, most or all contributions can be deducted either from personal income or as a business expense.
  • Investment Choice – You choose the vehicle, typically brokerage accounts, so you can manage your client’s portfolio within the products you sell.
  • Loans feature – Tax free loans are permitted of up to 1/2 of the total value of the Solo 401k up to a maximum of $50,000. Loans are not available in most other retirement vehicle options such as IRAs, SEPs, etc.
  • Roth feature – Solo 401(k) plans can be designed with a Roth contribution component allowing after tax contributions and tax free distributions after age 59 ½.

What is the deadline to set-up a Solo 401(k)?

The deadline is the end of the plan sponsor’s tax year, typically 12/31.