An Individual 401(k) or Solo 401(k) plan allows individuals from owner-only businesses and partnerships to set aside money in a tax-advantaged retirement account for themselves.
Key Advantages:
Is this retirement account right for you?
Easy to set up and maintain
Potentially higher contribution limits than a SEP IRA
More flexibility than other plans - may take personal loans, invest in collectibles, avoid UDFI, avoid UBIT on leveraged tax properties
Eligibility:
Available to self-employed individuals or business owners with no employees other than a spouse
Includes sole proprietors, partnerships, C corporations, S corporations with no full time employees
Plan document must accompany application
Funding Your Account:
The business owner is both employee and employer and can fund in both capacities; employee deferral and employer contribution
Withdrawals:
Withdrawals:
Without penalty, anytime after age 59 1/2, become permanently disabled, or are unable to work.
Withdrawals are taxed at an individual's current income tax rate
Up to $22,500 in salary deferral; $30,000 if age 50 or older; plus employer may contribute up to 25% of compensation to a maximum of $66,000 for 2023, not including catch-up contributions.
Administrative Responsibilities:
Annual Form 5500 filing after plan assets exceed $250,000
Up to $22,500 in salary deferral; $30,000 if age 50 or older; plus employer may contribute up to 25% of compensation to a maximum of $66,000 for 2023, not including catch-up contributions.
Administrative Responsibilities:
Annual Form 5500 filing after plan assets exceed $250,000
