Are you self-employed, with no employees? The Self-Employed 401K may be for you.
Are you self employed with no employees except for a spouse? If you are in that category and want to maximize your retirement savings, you have the option of establishing a Self-Employed 401k.
In this plan, you may contribute both as an employer – up to 25% of your compensation – and as an employee – lesser of $18,000 or 100% of compensation. Total contributions as an employer and employee may not exceed $53,000 or $59,000 for those over 50 years of age.
A wide range of investment choices are available that can grow tax free until withdrawn in retirement. Contributions are not mandatory and can fluctuate depending on annual revenue. Self-Employed 401k accounts with assets over $250,000 will have to file IRS Form 5500-EZ annually.
Withdrawals before age 59 ½ may be subject to a 10% penalty in addition to ordinary income tax. After 70 ½, you must take required minimum distributions. You should also be aware that the addition of even one employee beyond a spouse will lead to a required termination of the plan. The assets that you have already accumulated, however, can be rolled over into another type of retirement plan.
If the Self-Employed 401k sounds like it would benefit your retirement, contact a member of The Biondo Group to discuss the details as they would apply to your situation.
Chief Compliance Officer