Self employed individuals must act very soon to take advantage of this deduction for 2011.
Solo But Duo RolesOne of the great advantages of a Solo 401(k) is the ability to play the roles of both employer and employee, enabling the owner to contribute up to $49,000 of his annual income tax-deferred in 2011 (or $54,500 if at least 50 years of age). That’s a generous amount that might even drop the owner into a more advantageous tax bracket that can fast track the owner’s time to retirement.
The high contribution limits, tax savings and easy access to cash via penalty-free loans make the nominal price for solo 401(k)s a savvy financial move for any owner-only business that wants to save more than $5,000 a year (the traditional IRA limit).
In the past, many owner-only businesses have turned to traditional IRAs as a retirement savings strategy – an approach that, compared to a Solo 401(k), provides much lower contribution limits (not to mention penalties if the owner needed to access the money before reaching retirement age). Solo 401(k)s also offer more flexibility than about any retirement option. For example, just compare a 401(k) to a traditional IRA:
Annual Limit per Individual
Age 50+ Catch-up Amount
Roth Income Limit
Yes, loan to self
The solo 401(k) is more affordable than most self employed people realize.
Please comment or call to discuss how this affects you for 2011 and beyond.
- 401(k) and IRA Changes Coming in 2012 (money.usnews.com)
- Bill would remove penalty for tapping 401(k) to avoid foreclosure (401kplanadvisors.com)
- Tax Tips for Retirement (turbotax.intuit.com)