What Does a Solo 401K Provider Do for Me?

While self-employment is tempting for many, it is not without its downsides. When you’re your own boss, you are responsible for every failure in your business. There is no one to point to but yourself when something goes wrong.

That being said, there are numerous benefits that come with self-employment, one such benefit being the ability to start a Solo 401k for retirement. If you are considering starting a Solo 401k, you should have a background on the plan and be well versed in the factors necessary to consider when choosing a loan provider.

What Is a Solo 401k?

A Solo 401k is a retirement plan available only to those who are self-employed and have no employees. The plan is alluring for many due to the following elements:

  1. You Can Contribute as Both an Employer and an Employee. You have the option of contributing to your account as two different individuals, increasing the maximum amount that can be contributed each year.
  2. Tax Benefits. With a Solo 401k, you have the highest contribution limits available as compared to other retirement plans for self-employed individuals.
  3. Option for “Roth” or “Traditional” If you opt for the “Roth” Solo 401k, you can elect to pay taxes early and enjoy a tax break when it’s time to withdrawal your funds in retirement, or you can opt for the “traditional” 401k.
  4. Emergency Loan Availability. Obviously, your retirement fund should ideally be able to mature and you should not tap into the funds until you are ready to retire. However, emergencies and issues do occur that may necessitate that you take funds out early. As a self-employed individual, you may be limited in your emergency fund options. Solo 401k’s allow you to borrow the lesser of $50,000 or half of the value of the plan.

How to Choose a Solo 401k Provider

Many factors need to be considered when selecting your Solo 401k provider. A few considerations to take into account are as follows:

  1. Price of Plan. If you are able to, you’ll want to select a plan through a provider that has no extra or hidden fees.
  2. Ease of Managing Plan. Your time is extremely valuable as a self-employed individual. You need to be able to easily access your retirement fund and make changes and contributions without having to navigate a complicated system.
  3. Helpful Customer Service. When things go wrong or when questions arise, you want to be able to lean on experienced representatives who can triage the situation and get you back on track quickly. It’s important to know what resources you have available when you enter into an agreement with a provider.
  4. Depending on your business’s needs, you may want any number of customized options in your plan. Ensure that your provider has all of the options you want to successfully prepare for your retirement.

All in all, when selecting a provider, you want a service that is going to be transparent, helpful, and there for you when you need them. Keep these considerations in mind when selecting your Solo 401k Provider.

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