Comments on: Self-Employed Retirement Plans: Solo 401(k) Plan

By: Ric Hinkie

Ric Hinkie — Wed, 17 Mar 2010 19:58:32 +0000

Just to add to my earlier comment. Solo401ks are available for self employed people. Therefore, the husband can have one and so can the wife if she also has self employed income. As mentioned earlier, I set up the plan with Edw Jones and defer a portion of my consulting income (I am otherwise retired and draw SS). My wife works with me part of the time. Her income can also be deferred and contributed to the plan. Yes, both of us have to pay into SS and Medicare, but the long term benefits of having the Roth outway that cost for us.

By: Ryan

Ryan — Tue, 16 Mar 2010 13:14:02 +0000

John, great question. Based on my understanding, your wife must be employed to be eligible for Solo 401k contributions. I don’t think that necessarily means that she needs a W-2 because you can be a sole proprietor and not issue W-2s. However, if you already have that payroll system set up for your company, then it might be required. This is a situation where I recommend speaking with your accountant for more details about contribution requirements.

And paying additional Social Security tax isn’t necessarily a bad thing. My wife helps with my business, so I pay her a salary and from that we contribute to her Solo 401k. While it’s true we do pay additional SS tax on her salary, she also gets SS tax credits working toward her SS benefits for when she retires. Something to keep in mind.

By: John Mazzei

John Mazzei — Tue, 16 Mar 2010 10:04:36 +0000

I have a question about the spousal contribution. Do you have to go through the formality of paying your wife in order for her to be able to participate in your self-employed 401k? If so, do you have to pay pay-roll taxes on the amount you pay her? From a SS standpoint, I already contribute the max SS contribution per year for myself and I would rather not have to contribute more SS tax on behalf of my wife unless I have to.

By: bonnie johnson

bonnie johnson — Tue, 02 Feb 2010 17:38:36 +0000

could you email some information on solo and roth solo k. thanks

By: Ryan

Ryan — Thu, 17 Dec 2009 19:53:43 +0000

Mike, Solo 401k plans need to be established by the end of the calendar year, so if you are planning on establishing on for 2010, it is possible they may offer it by the end of the year. I have mine with Vanguard, and I opened it last year, which was the first year they offered it. Fidelity also offers a Solo 401k plan, and they are a top notch firm to deal with.

By: Mike

Mike — Thu, 17 Dec 2009 01:30:03 +0000

Looking to establish a Roth Solo 401k next year but my broker (TDAmeritrade) isn’t planning on offering one. Bummer…

By: Ric Hnkie

Ric Hnkie — Wed, 16 Dec 2009 23:54:49 +0000

In 2010 it may make sense to either convert a house already in a realestate IRA or to buy real estate into the Solo Roth. If you are converting regular 401k or IRA money into a regular Roth, you have two years to pay taxes on the conversion (the amount of money you pay for the real estate). Again this is based on advice from CPA, but we anticipate converting at least one home. The rent income goes into the Roth like an additional contribution. Can’t take it our for 5 years, but that is OK as the house should increase in value and the rent income also builds the value of the Roth. Then when you need it it comes out tax free.

By: Ric Hnkie

Ric Hnkie — Wed, 16 Dec 2009 23:37:10 +0000

To the question about both spouses and year end 2009 contributions to a Solo 401k. First, yes the contributions must be made by year end. Second, when I set mine up a year ago, I set it up as an employer. Edward Jones has a boiler plate plan. So this year my wife worked independently with me. Therefore, I had to amend the plan to add her to it. Now I will make my contribution (consulting income-expenses) for 2009 and here contribution will be made on the same basis. This is the advice from my CPA and money manager.