The solo 401(k) plan is a commanding tool for a business to save retirement and decrease their current bill of taxes. These plans are often over shadowed or ignored by the more popular for corporation 401(k) and SEP IRA plans. There is widely a lack of public information about them.
Solo 401(k) plans
Solo or only one participant 401(k) plans are accessible to solo business owners who do not have personnel or staff. If an owner employs seasonal workers registering less than 1,000 hours each year, then she or he may be entitled for the solo 401(k) plans as well. These solo plans have many of the features of the regular 401(k) plan without many of its limitations.
Fiduciary or suitability
Many brokers advertise themselves as advisers following the “suitability” standard. This means they can sell products that are suitable based on your age, tolerance for risk and other features but might not meet your needs. Those can come with fees that are high or commissions, or payments that are hidden to mutual fund companies they don’t have to reveal. So be sure to ask your potential consultant what standard — fiduciary or suitability — he or she detects and be certain to get a clear answer. You need the person to be a 401(k) plan adviser.
401(k) plan adviser
This employer-sponsored savings plan lets a worker t save for retirement as well as defer income taxes on both earning and contributions until withdrawal. Employees pay a share of their pre-tax wages; employers also can match some or all of workers’ donations.
Sole business owners
Solo business owners play two roles in their business – as an employer and an employee. As an employee, they candonate up to $18,000 a year plus a “catch up” of $6,000 if over the age of 50 years. Additionally, the business owner can increase up to $36,000 in contributions as an employer.