What Are the Ways a Solo 401(k) Plan Provider Can Help Me?

Published: Apr 05, 2021

Solo 401(k)

Entrepreneurs, freelancers, sole proprietors, and independent contractors can start a Solo 401(k) retirement plan to enjoy significant benefits. Some of the key advantages of selecting a Solo 401(k) plan include a lower taxable income, flexible loan options, and varied investment management solutions. If you are looking for low-cost financial flexibility, then a Solo 401(k) plan is best suited for you.

What are the Factors to be Considered When Selecting a Solo 401(K) Provider?

Professional plan providers can smoothen the process of setting up a Solo 401(k) plan. When you are ready to select a Solo 401k plan provider, ensure to evaluate the factors mentioned below:

Plan Cost: The Solo 401(k) retirement plan is usually free from any Asset Under Management (AUM) costs or trading fees. It is highly recommended to have a plan provider who offers complete transparency and has a low-cost model.

Easy Set-Up and Management: Ensure to select a provider who provides simple and easy plan set up and management solutions. It is suggested to have a provider who has a user-friendly dashboard, can provide monthly reports and financial statements, and offers long-term investment management and plan administration.

Quality Customer Support: The plan provider should come with a strong customer support service that is equipped to provide the necessary information and resolve any plan-related issues promptly.

Flexibility: It is also crucial to have a provider who offers flexible options to borrow loans, allows Roth contributions, and provides a wide array of investment opportunities through sustainable investment management. Lastly, the plan provider should support you with your tax form submission.

Benefits of a Solo 401(k) Plan

You are required to contribute both as an employee and an employer to your retirement funds through a Solo 401(k) plan. Here is a list of key advantages you can enjoy by choosing a Solo 401(k) plan:

Huge Tax Deductions: You can benefit from substantial tax deductions through a Solo 401(k) plan. Since this plan has one of the highest contribution limits in comparison to alternative self-employment retirement plans, one can obtain maximum tax advantage through maximized contributions. If you have the sole ownership of your business and do not intend to add any other employees, this is a great advantage.

No Immediate Taxes: Traditional Solo 401(k) allows you to reduce your yearly tax burden by lowering your taxable salary through tax deferrals. While Roth Solo 401(k) will enable you to claim a maximum of 25% of your gross salary or 100% of your retirement savings, depending on the lower amount. If you are concerned about a tax rate hike in the future, you still have the option to pay your taxes immediately.

Loan Flexibility: In case a personal emergency arises, and you are in immediate need of money, the Solo 401(k) retirement plan gives you the flexibility to borrow money from your savings. You have the ability to borrow a maximum of 50% of the plan value or an amount of $50,000, depending on the lower amount. This is a huge benefit for entrepreneurs, single business owners, and sole proprietors with limited funds.