Comments on: Solo 401(k) Plan – Individual 401k for the Self-Employed

By: Ryan

Ryan — Tue, 06 Apr 2010 14:57:36 +0000

You should still be able to open a SEP IRA, which will give you some of the same benefits, such as the tax deduction. However, depending on your income, you may or may not be able to contribute as much. Even if you can't contribute as much, opening a SEP IRA should still be a good option to reduce your tax bill this year and still save money in a self-employed retirement plan.

By: Self employed missed deadline

Self employed missed deadline — Tue, 06 Apr 2010 14:49:51 +0000

Ryan,

I have missed my deadline to open solo 401K to open the account.
I badly need to contribute to 401 K to avoid taxes.What are my options.
Can I just open for this year and contribute or any other options left for me.
Thanks in advance

By: Ryan

Ryan — Fri, 02 Apr 2010 14:40:10 +0000

Mike, I believe exemptions extend to employing children, up to a certain number of hours.

By: Mike

Mike — Fri, 02 Apr 2010 13:08:03 +0000

I believe the exemption extends to employing one child, as well.

By: Ryan

Ryan — Fri, 02 Apr 2010 12:44:36 +0000

Amish, you can only open a 401k if you are the sole employee of the company. The only exceptions to this are employing your spouse, or a part-time employee (less that 1,000 hours per year). I recommend visiting with your tax professional or seeking the guidance of a small business consultant or financial professional for your best options.

By: Amish

Amish — Fri, 02 Apr 2010 03:39:33 +0000

I have had a SEP as a self employed, single employee company. I recently hired an employee and read that after 3 years of employment completed I have to make contributions into the SEP for this employee. Could I transfer to a Solo 401k and only contribute for myself as owner/employee and exclude the hired employee?

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.