ADDING A SOLO 401K PLAN TO YOUR RETIREMENT PORTFOLIO DMITRIY FOMICHENKO
A client may already have a small business on the side, as an independent contractor or real estate
professional, for example. Or maybe he or she has always dreamed of owning their own business or being
self-employed, and they're ready to take the next step. If so, they may be qualified to participate in the Solo
401k plan, even while keeping their full-time job.
To qualify for the Solo 401k, the following two
eligibility requirements must be met:
1.
The presence of a self-employment activity
2.
The absence of full-time staff
The Solo 401k
is available to those
who are self-employed
and small business owners,
even on a part-time basis
In other words, the self-employment or small business must generate income, while not employing full-time
staff. The only exception is a spouse who is also involved with the business full-time. Additional part-time staff
is allowed but restricted to 1,000 hours or less annually.
Adding a Solo 401k to a retirement portfolio allows the client to take advantage of the Solo 401k's high
contribution limits. Being self-employed or a small business owner, the client wears two hats, an employee and
employer. Therefore he can make contributions to the Solo 401k as both. This year, the IRS increased the
maximum contribution limit to $51,000 if under the age of 50! If age 50 and above, a catch-up provision allows
an additional $5,500, making the maximum contribution limit $56,500!
It's important to note that all contributions are subject to a single contribution limit. Contribution limits are per
person, not per plan. This means that the client can make contributions to several 401k plans at the same time
(e.g. employer's 401k and Solo 401k), but the total cannot exceed the maximum contribution limit.
The Self-Directed Solo 401k Plan offers many benefits and can be a powerful addition to a client's retirement
portfolio. To learn more please visit: http://www.sensefinancial.com