«

»

Retirement plans for the self employed worker.

SG_retirement

Have you heard about solo 401(k) plans?

The traditional type of 401(k) retirement plan is now available for self-employed individuals and it lets you save more than other types of plans.

In the past, 401(k) plans were typically offered only by larger corporations. Employees could make pre-tax contributions by payroll deduction. The company would then usually match a percentage of those contributions. Investments grew tax-free until withdrawn at retirement.

One advantage of a 401(k) plan is the relatively large amount you can contribute each year – $16,500 in 2011 with an extra $5,500 catch-up if you’re 50 years old or older.

Now you can establish the same type of plan if you’re self-employed or run an “owner only” business. That’s a business with just you and possibly your spouse, but no employees.

You can save more with a solo 401(k) than with the traditional SEP, SIMPLE, or Keogh plans. That’s because you are able to make two types of tax-deductible contributions. First you make the usual employer contribution as owner of the business. Then you can make an additional salary deferral as an employee. As a result, you could potentially shelter up to $49,000 of your 2011 self-employment earnings from tax. If you’re eligible for the over-50 catch-up, that rises to $54,500.

The solo 401(k) plans are flexible and relatively simple to administer.

If you think this plan might be right for you, please contact our experts at SG Partners and they will help give you sound advice. They can tell you more about it and show you how much you could potentially save.

SG Partners Inc. wants to remind you that August 1 is your deadline for filing 2010 retirement or employee benefit returns (5500 series) for plans on a calendar year. (Normal deadline is July 31, but since that day is a Sunday,the deadline moves to the next business day, August 1st.)