Individual 401K Plan Advantages

The individual 401k plan is probably the best of all the retirement schemes available especially for those people who are self employed and who do not have any full time employees that may be their partner. However a person will need to meet certain requirements in order for them to qualify. But if they do they will not be restricted by the costly 401k rules relating to normal 401k plans. The main advantages of this that the person will be able to save both on the contributions that they make as well as administration fees.

The best way to maximize the full benefits of this particular 401k plan is by coupling it with a profit sharing plan also. So not only will the person be able to contribute themselves through their own deferrals but they will also be able to get the company to match these contributions. Plus, since the company is run by the person making the contributions, they can then deduct them from any income tax requirements citing them as a business expense. So it provides that person with the added benefit on not only saving on taxes for themselves but for their company as well.

Certainly the contributions that are made can quickly add up as long as they are fully maximized over the next few years. In 2006 the limit of contributions that a person was able to make using an Individual 401k plan was $15,000 if the person was under the age of 50 and $20,000 for those that were 50 or over. Plus the company would then be able to make a contribution of 25% of what the actual owner of the company (the person making the contributions) was paying into the plan. But this figure is also slightly different when it comes those companies which are either unincorporated or it is owned solely by one person. The figure that these companies contribute will be based upon the actual individual's amount.

Another benefit to be gained from using an Individual 401k with a profit sharing plan is that the amount a person contributes is left up to their own discretion, whereas with most other company 401k plans a person will need to contribute a specific set amount. This means that should the company run into some difficult financial periods, then this allows the person making the contributions to adjust them during those times.

Finally, if you need to, a person can roll over funds from other retirement accounts to their Individual 401k plan. This will make it much easier when it comes to record keeping and investment of retirement funds. Simply because everything is together under one account instead of several, control and management is less burdensome.

Bookmark the Site Now!