If you are running your own business or are self-employed, you can receive several benefits. Many people love to follow their passion and start their own venture rather than work for someone else. They get the same benefits as others because of several plans such as Boca Raton Solo 401K plans. They are designed to cater to the retirement needs of people who don’t want to work in an office. A retirement plan is something that everyone needs. It is important to know what these plans are all about.
What is a solo 401K plan?
This plan is designed for a business owner or partner as an employee or a spouse. You will be able to save money in this plan just like a 401K plan. The only difference is that in a 401K plan, the employer and employees are able to decide their contributions and are designed for large organizations. On the other hand, solo 401K plans are designed for small businesses with one employee who may be an employer, shareholder, or partner himself. This plan allows for maximizing their retirement savings on their own along with deductions.
Eligibility criteria for solo 401K plans?
To be eligible for this plan, you need to be a self-employed business owner with no employees. One exception is your spouse if he or she is earning from the same business. There are no restrictions on your age when it comes to this plan, and you should have earned sufficient money to support your contributions. Additionally, you need to obtain an employer identification number (EIN). Several providers may offer these plans, and you should consider a few of them for the most suitable one.
The benefits of solo 401K plans
These plans offer a wide range of benefits for small business owners. First, it offers higher contribution limits as compared to other plans such as IRA. Since you act both as sponsor and participant, you can make contributions in both capacities. This way, you can contribute as much as possible and meet the limits. Additionally, if your spouse is also working with you, he or she will also be able to participate in this plan. It should also be noticed that the contributions could be made in a lump-sum amount at one time only.
The small business owners are able to reduce the tax liabilities by making more contributions at the yearend as suggested by their CPA.