Bob, I appreciate your
posts on different retirement plans for the Business Owner but I don’t have any
employees so what can I do beyond a normal, traditional IRA? That’s one message I recently received from Mr.
Anonymous.
There’s an easy answer: SOLO 401(k)!
If it’s only you and even
your spouse, you can start an Individual, Solo 401(k) Plan. And just what is
this animal?
A Solo 401(k) is really
just a regular 401(k) plan with a Profit Sharing Option. In this vehicle, it affords more contribution
than a regular IRA. The Solo 401(k)
allows you alone OR you and your spouse to each contribute up to $18,000 each
calendar year, $24,000 if Past Age 50. You
can also contribute up to 25% of your compensation in the form of a Profit
Sharing component. Keep in mind your
total maximum investments cannot exceed $53,000 (2016).
One other advantage is
that the Solo 401(k) is not subject to complicated and cumbersome administrative
rules or discrimination testing. Yet you
do need a third party administrator.
Here’s a nice twist that
may even appeal to you. You can make
your Profit Sharing section a Roth
401(k). Thus when contributions are
made they are with After-tax monies and will allow you to withdraw Tax-Free.
And just like other retirement plans there are thousands of
investment choices.
Next, I’ll show an
example.