TD Ameritrade Solo 401k for Small Business Owners

As a small business owner, you're likely no stranger to juggling multiple responsibilities, from managing employees to keeping track of finances. With a Solo 401k plan through TD Ameritrade, you can set aside funds for retirement while also reducing your tax liability.

The Solo 401k plan is designed specifically for self-employed individuals and small business owners, allowing you to contribute up to 25% of your income towards your retirement account. This can be a significant tax savings opportunity, especially if you're already deducting business expenses on your tax return.

One of the key benefits of the TD Ameritrade Solo 401k plan is the ability to borrow from your own account, with interest rates as low as 6.99% APR. This can be a helpful feature if you need to access funds for business expenses or other financial emergencies.

TD Ameritrade Solo 401k is a solid choice for self-employed individuals, offering a functional interface and commission-free ETFs. You can use it for a solo 401(k) and make Roth contributions and IRA rollovers into the plan, but note that 401(k) loans are no longer allowed since the merger with Schwab.

TD Ameritrade's solo 401(k) plan allows for up to $66,000 in contributions, including employee and employer contributions. This is broken down into four types of contributions: employee tax-deferred, employee tax-free, employee after-tax, and employer contributions.

Here's a breakdown of the types of contributions you can make to a TD Ameritrade solo 401(k):

TD Ameritrade is a brokerage company that offers a solo 401(k) option. It's a reputable company with a functional interface, at least from my own experience with a Health Savings Account.

The main investments you can use in a TD Ameritrade solo 401(k) are ETFs via its brokerage option, many of which are offered commission-free. This can help keep costs down and make investing more efficient.

TD Ameritrade allows Roth contributions and IRA rollovers into the plan, making it a flexible option for retirement savings. However, it no longer allows 401(k) loans, which is a feature some investors may miss.

While TD Ameritrade is a viable option for a solo 401(k), it's not the only choice, and you may want to consider other providers that offer more features or customization options.

If you're considering a solo 401(k), you'll need to decide where to open it. Your top choices for a standard plan are Vanguard, Fidelity, Schwab, eTrade, and TD Ameritrade.

These companies also serve as custodians for many customized plans. You can consider them if you're fine with the standard options.

TD Ameritrade is one of the top choices for a standard solo 401(k) plan. You can open a solo 401(k) with them and take advantage of their low fees and user-friendly interface.

A fully customized plan, on the other hand, can offer special features like the Mega Backdoor Roth IRA process. However, these plans often come with higher fees and may require more setup and maintenance.

A solo 401(k) is perfect for a one-person or husband-and-wife business with no other employees.

The business doesn't have to be a full-time endeavor, nor does it need to generate a large income. I started my solo 401(k) when I had only a few hundred dollars a year from self-employment.

You can contribute up to $22,500 ($30,000 if 50+) into the plan as an employee deferral/contribution, and your employer (i.e. you) can contribute another $43,500 into it for a total of $66,000 ($73,500 if 50+).

As a self-employed individual, you can open a solo 401(k) with a provider like TD Ameritrade, which also serves as the custodian for many customized plans.

Dr. Rodriguez, a 43-year-old neurologist, moonlights on weekends at a completely unrelated hospital where they are paid on a 1099 as an independent contractor, making another $100,000 per year. They contribute $20,000 as an employer contribution to the solo 401(k).

If you're considering a TD Ameritrade Solo 401(k), you may also want to explore other retirement account options to maximize your savings.

You can contribute up to $22,500 ($30,000 if 50+) to a Solo 401(k) in 2023, and an additional $43,500 as an employer contribution, for a total of $66,000 ($73,500 if 50+).

If you have a lot of self-employment income, you might also want to consider a personal defined benefit/cash balance plan, which can have contribution limits of up to six figures or more per year.

Here are some options to consider:

A retirement plan is a specialized savings plan designed to help you prepare for your golden years.

There are various types of retirement plans, but one popular option is the Solo 401(k) plan.

The Solo 401(k) plan is an IRS-approved plan designed specifically for self-employed individuals or small business owners with no employees other than the owners.

It's essentially a traditional 401(k) plan tailored for solo entrepreneurs or business owners.

This plan allows you to save for retirement while also potentially reducing your tax liability.

The Solo 401(k) plan is not a new type of plan, but rather a traditional 401(k) plan covering a business owner with no employees, or that person and their spouse.

A Solo 401(k) plan can be transferred from one brokerage firm or custodian to another tax-free, just like an LLC moving funds from one bank to another under the LLC name.

This means you can move your plan funds from one brokerage firm to another without incurring any taxes. For example, if you opened an account with TD Ameritrade and now want to move the plan funds to Fidelity, you can simply open a new plan there and move the funds.

However, if you acquire a plan from a brokerage firm and want to move it to another brokerage firm, things get a bit more complicated. In this case, you'll likely need to treat it as a new plan since there's a new plan document.

But don't worry, if you acquire a Solo 401(k) plan from a plan document provider, such as IRA Financial, you won't run into this issue. You'll be able to bring your own plan to the brokerage firm and move forward without any hassle.

If you're being required to close your TD Ameritrade Solo 401(k) plan and move the plan funds, you can open a new Solo 401(k) with IRA Financial and transfer the plan assets tax-free.

If you're looking for a fully customized solo 401(k) plan, you have options that go beyond the standard plans offered by major brokerages.

You can consider companies that specialize in creating customized plans, often at a cost of just a few hundred dollars.

These companies can provide a plan that includes all the features allowed in 401(k) plans, such as Mega Backdoor Roth IRA contributions and self-directed investments.

Dr. Rodriguez, a neurologist mentioned in the article, had a fully customized solo 401(k) plan held at Fidelity, although Fidelity was not the designer of the plan.

For a few hundred dollars, these companies can give you a fully customized solo 401(k) that meets your specific needs.

Most of these companies are small, with just one or two people running the show.

You can choose from a variety of companies, each offering their own customized plan options.

A significant distinction exists between solo 401(k)s and "real" 401(k)s when it comes to asset protection. Solo 401(k)s generally get the protection that IRAs get in their state. In many states, that is still unlimited protection in bankruptcy, but some states provide more limited or even no protection at all to your creditors in bankruptcy.

You can contribute up to $22,500 ($30,000 if 50+) to a solo 401(k) as an employee deferral/contribution. This contribution limit applies to all 401(k)s and 403(b)s you're eligible for.

For 2023, the maximum total contribution to a solo 401(k) is $66,000, which can be made up of employee deferral/contribution, employer contributions, employee after-tax contributions, and more. Employer tax-deferred contributions are limited to 20% of net self-employment income.

Here are the different types of contributions you can make to a solo 401(k):

You can also contribute up to $7,500 more as a catch-up employee contribution if you're 50 or older. However, you can never contribute more to the account than you earned in self-employment income.

If you're fine with standard options, your top choices for a solo 401(k) are Vanguard, Fidelity, Schwab, eTrade, and TD Ameritrade. They also serve as custodians for many customized plans.

These companies offer cookie-cutter, off-the-shelf plans from the main mutual fund companies/brokerages.

The contribution limits for a solo 401(k) can be complex, but it's essential to understand them to maximize your savings.

The maximum employee contribution (Roth or tax-deferred) for someone under 50 is $22,500, while those 50+ can contribute up to $30,000.

For 2023, the maximum total contribution (employee and employer contributions) is $66,000, although that does not count the $7,500 catch-up employee contribution that those 50+ can make.

Employer tax-deferred contributions are limited to 20% of net self-employment income, so someone with only $10,000 in net self-employment income could only make an employer contribution of $2,000.

If you cannot max out the account with employee deferral contributions and employer contributions, you can make up the difference with employee after-tax contributions if your plan allows it.

You can never contribute more to the account than you earned in self-employment income.

Here's a breakdown of the contribution limits for 2023:

Keep in mind that these limits can change over time, and it's essential to check the IRS website for updates.

If you have multiple income streams, you can have multiple 401(k)s, but there's a limit to how much you can contribute to all of them.

You can contribute up to $22,500 ($30,000 if 50+) to all 401(k)s and 403(b)s you're eligible for, but each 401(k) from an unrelated employer has its own maximum contribution amount of $66,000.

This amount can be split between employee contributions, tax-free contributions, after-tax contributions, and employer contributions.

Here are the four types of contributions you can make to each 401(k):

If you have a regular job with a 401(k) or 403(b), you can use up your $22,500 employee contribution there and also receive some matching employer dollars.

You can also open a solo 401(k) for your moonlighting dollars and make employer contributions of up to 20% of your net income (net of all expenses including the employer half of payroll taxes) to the solo 401(k).