Solo 401K is a kind of retirement plan approved by the IRS that is designed to benefit a self-employed person or a single owner-employee of a company. It is other times known as Individual K, Single K or Self Employed 401K plan. It is not really a new plan but since the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) passed in 2001, it has gained popularity.
An individual 401K is referred to as a solo 401K, specifically designed in 2002 for the self-employed individual. In today’s economy, many have gone into a self-employment mode to make ends meet or have come across an opportunity for a career and lifestyle transition. The solo plan works similar to a self directed IRA, allowing for retirement planning and tax saving contributions with some additional business deductions for the owner.
For most sole proprietorships and small business owners, selecting a retirement plan that best fits ones retirement and tax objectives is an important decision that merits careful consideration. Both the Self Directed IRA LLC and the Solo 401K Plan offer individuals the ability to make traditional as well as non-traditional investments, such as real tax-free and without custodian consent.