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Who Benefits the Most From Using a Solo 401k Plan?

Any sole proprietor or small business owner that wishes to make high annual tax-deferred or Roth contributions, as well as have the ability to borrow up to $50,000 from the plan tax-free. Under the 2018 Solo 401(k) contribution rules, a plan participant under the age of 50 can make a maximum annual employee deferral contribution in the amount of $18,500. That amount can be made in pre-tax, after-tax or Roth. On the profit sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single member LLC) annual profit sharing contribution up to a combined maximum, including the employee deferral, of $55,000, an increase of $1,000 from 2017.

Who Benefits the Most From Using a Solo 401k Plan?

For plan participants over the age of 50, an individual can make a maximum annual employee deferral contribution in the amount of $24,500. That amount can be made in pre-tax, after tax, or Roth. On the profit sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single member LLC) annual profit sharing contribution up to a combined maximum, including the employee deferral, of $61,000, an increase of $1,000 from 2017.

With a Solo 401(k) plan you can borrow up to $50,000 or 50% of your account value, whichever is less. The loan can be used for any purpose.

For more information about the Solo 401(k) plan, please contact us @ 800.472.0646.

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