Self Directed Solo 401k Retirement Savings Made Easy

Self-directed solo 401k retirement savings can be a game-changer for entrepreneurs and small business owners. According to the article, a solo 401k plan allows you to set aside up to $57,000 in 2022, plus an additional 20% of your self-employment income, for a total of $72,500.

You can invest your solo 401k funds in a variety of assets, including real estate, stocks, bonds, and cryptocurrencies. In fact, a solo 401k plan can be used to invest in a business you own, such as a rental property or a small business.

A self-directed solo 401k plan is a type of retirement account that allows you to take control of your investments. With a self-directed plan, you can choose from a wide range of investment options, including alternative investments like private equity and hedge funds.

Self-directed solo 401(k)s are a powerful retirement tool for self-employed individuals and small business owners.

You can open a solo 401(k) if you're a self-employed business owner with no W-2 employees, except possibly your spouse.

The Solo 401(k) was created by the Economic Growth and Tax Relief Reconciliation Act of 2001 and became effective on January 1, 2002.

Self-employed individuals and small business owners can take advantage of higher contribution limits and the flexibility to contribute based on their business's profitability.

To open a solo 401(k), you'll need an employer identification number (EIN), which you can apply for directly on the IRS website.

Here are the key eligibility requirements for opening a self-directed solo 401(k):

With a solo 401(k), you can lower your taxable income and access funds through a loan provision, making it a great choice for building wealth.

The contribution limits for a self-directed solo 401(k) plan are quite generous, allowing you to contribute up to $69,000 or $76,500 if you're over 50, including catch-up contributions.

You can contribute up to $23,000 as an employee salary deferral contribution, and an additional $7,500 as a catch-up contribution if you're over 50, raising the total to $35,000.

The profit-sharing contribution limit is 25% of your net earnings from self-employment, capped by the combined limit of $69,000 or $76,500 with catch-up contributions.

If your spouse works for your business and receives compensation, they can also contribute to the solo 401(k), effectively doubling the family's retirement savings potential.

Here's a breakdown of the contribution limits for a solo 401(k) plan:

* Standard Contribution Limit:

+ Employee Salary-Deferral Contribution: $23,000 (2024)

+ Employee Salary-Deferral & Employer Profit-Sharing Contributions: $69,000 (2024)

* Catch-up Contribution Limit (Age 50 and older):

+ Employee Salary-Deferral Contribution: $30,500 (2024)

+ Employee Salary-Deferral & Employer Profit-Sharing Contributions: $76,500 (2024)

Note that these limits are subject to change, and it's essential to review the current year's contribution limits to ensure you're taking full advantage of the solo 401(k) plan's benefits.

The Roth catch-up contribution provision for 401(k)s, 403(b)s, and 457(b) plans states that all catch-up contributions for savers who earned over $145,000 in the prior year must be post-tax Roth contributions.

The IRS is allowing a two-year transition for Roth catch-up contributions, with a delayed start date of January 1, 2026, to allow employers and eligible plan participants to prepare and plan for the change.

A self-directed solo 401(k) offers several plan options and features that provide flexibility and control over your investments.

You can choose from three solo 401(k) options offered by Advanta IRA: Do Your Own Plan (Checkbook Control), Standard 401(K) Recordkeeping Plan, and Enhanced 401(K) Recordkeeping & Reporting Plan. Each option has its own set of features and benefits.

With the Do Your Own Plan (Checkbook Control) option, you act as the plan trustee, giving you complete control over your account. You can also hold uninvested cash in a bank account in the name of your 401(k). In contrast, the Standard and Enhanced plans hold uninvested cash in Advanta IRA's trust account.

Here are the key features of each option:

The Mega Option allows you to maximize your total annual contributions by making employer, employee, and mega Roth contributions. You can make up the difference in contributions for that tax year with the mega Roth component if the sum of your employer and employee contributions is less than the annual limit set by the IRS.

A key benefit of the Mega Roth Option is that it allows you to make after-tax contributions, which must be immediately converted to the Roth component within the plan to grow tax-free. This means you can enjoy tax-free income on earnings in the account.

Here are the details on the Mega Roth Option:

With a solo 401(k), you have the option to choose between a traditional 401(k) and a Roth 401(k), each offering unique tax benefits. You can opt for the traditional 401(k), which provides a tax break today, or the Roth 401(k), which offers tax-free income on earnings in the account.

The traditional 401(k) allows you to reduce your income in the year your contributions are made, but distributions in retirement will be taxed as ordinary income. In contrast, the Roth 401(k) offers no initial tax break, but allows you to take distributions in retirement tax-free.

A solo 401(k) plan also provides the option to invest in alternative assets, such as private real estate, notes, or other investments, giving you more control over your investments. This is made possible by the self-directed nature of the account.

You can also choose to have a separate entity, such as a trust or LLC, act as the plan trustee, which can provide an additional layer of control and flexibility. Alternatively, you can act as the plan trustee yourself, giving you complete control over the plan.

Here are the three solo 401(k) options offered by Advanta IRA, each with its own features and benefits:

Each option allows you to make contributions as an employer and as an employee, and provides pre-tax savings and higher contribution limits than traditional or Roth IRAs.

To be eligible for a self-directed solo 401(k), you must have self-employment income. This can come from a variety of sources, such as freelancing, consulting, or running your own business.

Your business must have no employees other than you or your spouse. This is a key requirement for a solo 401(k), and it's essential to ensure that your business meets this criteria.

You can have a job with a company that offers a 401(k) plan and still open a solo 401(k). However, you'll need to be mindful of the 401(k) contribution limits, which apply per person, not per plan.

Here's a breakdown of the eligibility rules for a solo 401(k):

You can open a solo 401(k) at many online brokers, and it's a great option for self-employed individuals who want to maximize their retirement savings while enjoying valuable tax deductions.

If you're self-employed or own a small business, you might be eligible for a Solo 401(k) plan.

Self-employed business owners and small businesses with no W-2 employees can benefit from a Solo 401(k) plan.

Wanting to maximize your retirement savings while enjoying valuable tax deductions is a great reason to consider a Solo 401(k) plan.

You can access funds through a tax-free loan option with a Solo 401(k) plan.

This can be a lifesaver in case of an emergency or unexpected expense.

To be eligible for a solo 401(k), you must have self-employment income. Your business must have no employees other than you (or you and your spouse).

You can contribute to a solo 401(k) even if you have a job with a company that offers a 401(k) plan. However, the 401(k) contribution limits apply per person, not per plan.

A solo 401(k) is designed for a business owner with no employees, but the IRS allows an exception: your spouse, if they earn income from your business. This can effectively double the amount you can contribute as a family.

You can contribute up to $69,000 in 2024 and $70,000 in 2025, with an additional catch-up contribution of $7,500 for those 50 or older. In 2025, people ages 60 to 63 get a higher catch-up contribution of $11,250.

To be eligible for a solo 401(k), you must meet two criteria: you have self-employment income and your business has no employees other than you (or you and your spouse).

Here are the key eligibility requirements for a solo 401(k) in a table format:

The deadline for establishing a solo 401(k) plan is the last day of your business's tax year (December 31, for a calendar tax year).

Getting Started with a Solo 401(k) is easier than you might think. Many online brokers offer solo 401(k) plans, and you can open one with just about any major online broker.

To get started, you'll need an employer identification number (EIN), which you can apply for directly on the IRS website. You'll also need to choose a broker and complete a plan adoption agreement, which your broker will provide.

Once your solo 401(k) is set up, you can set up your investments and contribute to your account. You can invest your solo 401(k) in a wide variety of investments, including individual stocks and bonds, mutual funds, exchange-traded funds, and more.

If you have more than $250,000 in assets at the end of the year, you'll be required to file an annual report on Form 5500-EZ. For assets less than $250,000, no annual report is required.

Here are the key steps to set up a solo 401(k):

To get started with a solo 401(k) today, you can take advantage of the 2024 contribution limits and plan your retirement savings. You can open a solo 401(k) at most online brokers, though you'll need an employer identification number.

You'll need to complete a plan adoption agreement and an account application, which will provide personal information about yourself and your business. You can then set up your investments, including individual stocks and bonds, mutual funds, exchange-traded funds, and more.

To open a solo 401(k) plan, follow these steps: get an employer identification number, choose a broker, complete a plan adoption agreement, open your account, contribute to your account, and choose your investments. You can also make employer profit-sharing contributions until your tax-filing deadline for the tax year.

You have until the last day of your business's income tax reporting year, including extensions, to open a solo-k. This gives you a deadline to establish your plan early in the year so you can take advantage of employee salary deferrals.

Here are some key advantages of a solo 401(k): you can make contributions as an employer and as an employee, pre-tax savings and higher contribution limits than traditional or Roth IRAs, and Roth and mega Roth options that allow you to maximize your employee contributions.

Ongoing compliance is a breeze with a Solo 401(k) plan, requiring less administration than traditional company plans.

If your solo 401(k) has more than $250,000 in assets at the end of the year, you'll need to file an annual report on Form 5500-EZ.

No annual report is required if your solo 401(k) has less than $250,000 in assets.

This means you can focus on growing your retirement savings rather than dealing with paperwork.