What is an Individual 401(k)?
An Individual 401(k), also known as a Solo 401(k), is a retirement account that gives you maximum flexibility and freedom to invest for your future. The Individual 401(k) is similar to a traditional 401(k), but is designed specifically for businesses that employ only the owner, their spouse, and partners.
Important features of an Individual 401(k) Plan
- Designed for businesses with no eligible rank and file employees
- Has the same benefits of a 401(k)
- Total employee deferral employer contributions may not exceed $54,000
- Additional employee deferrals of $6,000 for individuals 50 and older
An Individual 401(k) plan has two components based on your role as both employer and employee:
- (Employee) Salary deferral, based on earned income, up to the allowed limit
- (Employer) Profit-sharing contribution, maximum 25% of compensation, up to the allowed limit
With Entrust, you can establish the salary deferral component as either a Roth or Traditional tax-deferred plan, which reduces your taxes now and offers tax-deferred savings. With the Roth, you make after-tax contributions to the account, and future withdrawals are tax free.
What are the eligibility requirements for an Individual 401(k) Plan?
You can open and make contributions to an Individual 401(k) if both of the following requirements are met:
- You are a sole proprietor, or you own a business with no employees other than a spouse or partners.
- Taxable compensation has been received during the year.
Is an Individual 401(k) the right plan for me?
How to determine if an Entrust self-directed Individual 401(k) is the right retirement plan for you:
- Are you a sole proprietor with no employees other than your spouse or partners?
- Are you looking for the largest potential contribution for a business without employees?
- Do you want the flexibility to invest beyond stocks and mutual funds?
- Do you want the capability of borrowing from your plan?
- Do you want to purchase leveraged real estate in your plan and avoid UBIT (Unrelated Business Income Tax)?
If you answered 'yes' to all or most of these questions, an Individual 401(k) may be a good choice for you.
In addition to the allowances above, Entrust offers you the option to choose from various service options. Explore these options to see how you can best direct your future with ease:
- Traditional service
- Required plan documents service
- Recordkeeping service on your self-directed investments
- Do Your Own (DYO) (you must do your own recordkeeping and reporting)
- Outsourced service (you must have your own plan documents)
Transfer or Rollover your funds to Entrust to get started
If you currently have an Individual 401(k) and want to self-direct your funds into nontraditional investments, you can transfer or rollover the funds to Entrust (without penalty) and gain access to a wide range of alternative investments, from real estate and gold to private stock and small business. Contact us today to get started.
Before making contributions to an Individual 401(k) Plan, learn the contribution limits that apply: