If you’re the
type who has “gone it alone” and established a small
business, you may be looking for the same benefits usually
found in big business 401(k) plans but want to forgo the
complex rules and administration expenses associated with
them.
The answer for
you – as a solo business owner without employees – may very
well be the solo 401(k), even over perhaps the more popular
Keogh, SEP, or profit-sharing plans. Also referred to in
the popular press as “uni (k),” ”individual (k),” or “single
participant (k)” plans, these plans give owner-only
businesses the advantages of a traditional 401 (k) –
including higher contribution limits and the ability to
borrow from the plan – at a relatively affordable price.
Advantages
include:
-
High
contribution limits;
-
Catch-up
contributions if you’re 50 or older;
-
Flexibility
– you can contribute to it if and when you choose;
-
Fully
tax-deductible contributions based on your earned income
or compensation;
-
Potential
access to tax-free/penalty-free loans; and
-
The ability
to roll other funds from other qualified plans into your
solo 401 (k), without limit.
Fees to
establish and maintain a solo 401 (k) vary widely, and
mutual fund companies tend to lead the pack as plan
providers.
