If you are under 50 years of age at the end of 2011, 2011 IRA limits contributions are $5,000 annually. For those 50 years of age or over at the end of 2011, contributions are $6,000. In both cases, there may be adjustments depending on your adjusted gross income. These totals may also be split between a traditional IRA and a Roth IRA.
Solo 401K plans are self-employed retirement plans, developed to offer retirement options to business owners. Solo 401K plans require less upkeep in comparison to the traditional IRA or Corporate Employer 401k plans. Small business owners and their spouse are allowed to participant. If the business has employees, the owner must establish a separate plan for the full-time employees, and only part-time employees working more than 1,000 hours per year are eligible to participant.
Solo 401K Rules
Solo 401K rules for 2011 allow contributions of $49,000 if under the age of 50 and $54,500 if 50 years of age or older. Solo 401K rules stipulate limits allowing business owners to match up to 25% of their total earned pay cited on the W-2. The business owner can also contribute up to 20% of the total net income or profit of the business. The business owner has the flexibility to schedule these contributions according to funds accessibility and business profits.
In cases where the spouse is an employee of the business, they are able to contribute the maximum amounts into their own account under the business plan. This technique can be a benefit to the couple by taking advantage of double tax deferrals.
Self-directed IRA is also referred to as a Checkbook Control under an LLC-structured function, which allows the account owner to control how the funds are invested. The process is fairly simple: when the account owner finds an investment they like, they basically write a check from the LLCs’ account. It’s a direct transaction without fees or approvals needed from a custodian. Profits on the investments are deposited directly back into the LLC’s account.
A self-directed IRA offers expanded opportunities for investments that may include real estate, tax liens, loans and even private businesses. Under the checkbook concept, self-directed IRA owners can participate in these investments without additional costs or taxes. The account owner manages the investment selection, adding value to the account’s investment portfolio using account funds and collecting tax-deferred profits.