A solo-401(k) can be used by self-employed individuals or business owners with no full-time employees except for a spouse.
One unique feature of a solo 401(k) is that it allows you to save as both employer and employee, allowing you to possibly save even more than you would be able to save in a SEP IRA.
Maximum contributions limits for 2020 are $19,500 if you are under fifty and $26,000 (if you are 50 or older) as the employee, AND up to 25% of income as employer, up to a limit of $57,000.
Traditional and Roth options are available, allowing you to deduct taxable income, or to take advantage of tax-free withdrawals in retirement.
Like IRA’s, taxes and penalties do apply to non-qualified early withdrawals.
Unlike IRA’s, contributions follow a January 1-December 31st calendar year. already begun taking withdrawals, however, you can continue to contribute to a solo 401(k) as long as you continue to be self employed.
Remember that a 401(k) is an account title. It’s the investments you choose for your account that will determine whether the account increases or decreases in value. Common types of investments for solo 401(k)’s include, stocks, bonds, mutual funds, and money market instruments
To find out if a solo 401(k) makes sense for you, please don’t hesitate to reach out to me! I’m happy to discuss the details!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. We suggest that you discuss your specific situation with your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results.
Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.
Dollar cost averaging involves continuous investment in securities regardless of fluctuation in price levels of such securities. An investor should consider their ability to continue purchasing through fluctuating price levels. Such a plan does not assure a profit and does not protect against loss in declining markets.
All investing involves risk including loss of principal. No strategy assures success or protects against loss.