You may have heard of this investment option by the names “Solo 401k” or “Self Employed 401k“, but I like the name Individual 401k, so that’s what I’m going to use to describe this great retirement option.

What Is An Individual 401k?

It’s a plan that enables small business owners (preferrably one with no employees) to contribute much more than a Roth IRA.  This plan allows you can contributed up to $49,000 a year, if you have enough profit!  How’s that for a contribution!!!

If you are self-employed you can contribute $16,500 + 25% of your compensation from your business… up to $49,000.

If you have a very profitable business, this would definitely be an option to consider!

The tax benefits of an individual 401k are as follows.

• Contributions to an Individual 401(k) plan are tax-deductible
• Earnings grow tax-deferred.
• Contributions are not taxed until withdrawn.

The Individual 401k is most benefitial to small businesses that don’t have any employees.  Once an employee enters the picture the paperwork gets much more complex, since the plan must be offered to each employee.

I’m not in a position to take advantage of this great option.  But if you own a small put profitable business where you don’t have any employees, this plan may just be your thing!

Interested in opening up an individual 401k, check out at Charles Schwab’s Individual 401k offering.

-MR

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