Going Solo? A Retirement Plan for the Self-Employed

The solo 401(k) is a retirement savings vehicle designed for the self-employed. This plan option is only for single employee-businesses with no employees other than their spouse. One of the biggest benefits that a solo 401(k) plan offers is that it has a generous contribution limit. In 2015, a solo 401(k) plan owner can contribute up to $18,000 in an employee salary deferral (plus $6,000 if you are 50 or older). The employee salary deferral means that your taxable income for the year is reduced by the amount of money you contribute to the plan.  The solo 401(k) also has a Roth “bucket” option, allowing you to make Roth contributions ($18,000 for employees plus an additional $24,000 for individuals over 50) for 2015 without income restrictions. Furthermore, the solo 401(k) plan allows you to borrow up to $50,000 or 50% of your account value, up to $50,000.

In addition to what the employee contributes, the employer can contribute another $35,000 annually.  The total contribution limit is $53,000 (or $59,000 for individuals over 50). If you are a business owner looking to maximize your savings while minimizing next year’s taxes, the solo 401(k) plan may be a great option.

A solo 401(k) is a flexible retirement plan for self-employed owners, such as real estate investors, real estate agents, consultants, lawyers, doctors, contractors, and more.  With a solo 401(k), there are various ways you can invest in your retirement.  A solo 401(k) allows you to quickly purchase time-sensitive, alternative investments, such as rental properties, tax liens, private mortgages, precious metals, and other non-traditional investments.

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