Are you Taking Advantage of the Solo 401(k) Plan?

 

A Solo 401(k), (also known as a Self Employed 401(k) or Individual 401(k), is a qualified retirement plan for Americans that was designed specifically for employers with no full-time employees other than the business owner(s) and their spouse(s).

The Solo 401(k) is often the most attractive plan if you own a business and qualify because it allows much higher contribution amounts. You can also elect to make it self-directed. This would allow you to invest the money into almost anything you wanted, such as real estate, notes, gold silver, stocks and more.

 

Who is the Plan for?

The plan is designed for owner-only businesses and their spouses. It can be established for both incorporated and unincorporated businesses, sole proprietorship, partnerships and corporations.

 

Can you Benefit?

If you qualify, the Solo 401(k) offers higher contribution amounts and possible tax deductions. Two components comprise the maximum Solo 401(k) plan contribution:

  • An employee salary-deferral contribution – The employee can contribute up to $19,000 annually through salary deferral in 2019, although this may not exceed 100% of the employee’s pay.
  • An employer profit-sharing contribution – The annual limit for this is 25% of the employee’s pay (20% for a self-employed person).

The total annual contribution limit from both sources is $56,000 in 2019 for those under age 50.

In 2019, under a “catch- up” provision, individuals age 50 or over may contribute up to $25,000 allowing for a total contribution limit of $62,000.

 

The business entity must have no additional employees other than the spouse of the proprietor—or, in the case of a partnership; the only employees must be self-employed partners and their spouses.

And finally, it’s important to understand that the money you contribute to your solo 401(k) must be money that comes from the associated business. For example, you cannot use your W2 income from another line of work to contribute to this plan. The money must come from the same business the solo 401(k) was created for. Here is a link to the IRS website for more general information and Q&A. https://www.irs.gov/retirement-plans/one-participant-401k-plans

 

Here is a summary of 2019 contribution limits for various plans. As always, please consult your IRA provider or CPA for more information pertaining to your specific financial situation.

 

Traditional and Roth Contributions

  • 2018 & 2019 Contribution Limits:
  • $5,500 | $6,000
  • $1,000 catch-up (Age 50+)

 

HSA Contributions

  • 2018 & 2019 Contribution Limits:
  • Single – $3,450 | $3,500
  • Family – $6,900 | $7,000
  • $1,00 catch-up (Ages 55+)

 

SEP IRA Contributions

  • 2018 & 2019 Contribution Limits:
  • 25% of compensation up to $55,000 | $58,000

 

SIMPLE IRA Contributions

  • 2018 & 2019 Contribution Limits:
  • $12,500 | $13,500 (Before age 50)
  • $3,00 catch-up (Age 50+)

 


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Telephone: 512.572.6900

http://notablefund.com

 

(This article is an excerpt from Joshua N. Andrews Book titled Paper Profits – How to Buy and Profit from Notes a Beginners Guide)

Request a free copy mailed to you by clicking here:  http://notablefund.com/paper-profits-book-request

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