Self-Employed Retirement Solutions: How To Start Small Business 401k Plans?


Do you own your business? Are you planning to start a new one? Well, there is no such thing as the right time for business and any moment is good to start making your own professional decisions. Starting a business is not just about starting your own shop or online store but carefully planning the next few months and even years of your life. The first thing to consider is your retirement and building a nest egg for your vacant years. For most of the entrepreneurs, starting a retirement fund before planning for the business may sound outrageous. However, it does help to start considering your options side-by-side.

Why Solo 401k Plans Are Popular Among Small Business Owners?

There are plenty of small business 401k plans to choose from and solo 401k is the perfect one for self-employed professionals. Solo 401k is a retirement solution for self-employed and it allows them to make substantial contributions against the traditional IRA plans. Anyone who owns a business (with zero employees or employees who could be barred from such benefits) could participate in these plans. All you need is some self-employment activity going on along with negligible full-time employees.

IRS considers any business that is run to generate profits eligible for solo 401k account and it even includes individuals who are involved in part-time self-employment. Professionals working for an employer along with part time self-employment are eligible for both employer’s 401k and solo 401k savings plans. For small business 401k plans, entrepreneurs can include their spouse in the plan as well.

One must understand that not all solo 401k plans are equal and it is important to find one that offers Checkbook control along with the ability to make non-traditional investments. Some of these non-traditional investment opportunities include real estate, foreign currency, private businesses, commodities, precious metals, and options.

The most attractive property of small business 401k plans is the higher contribution limits. One can contribute up to $53,000 in solo 401k retirement plans and the limit goes even higher for individuals who are 50 years or older. Professionals above 50 years of age can contribute up to $59,000 in these retirement accounts.

However, every good thing comes at a cost and in solo 401k plans; you need to wait until you are 59 ½ years old to withdraw money from these funds. If withdrawn earlier, IRS puts a penalty of 10% on such withdrawals.

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