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Solo 401k plans have become a very popular option for those that are self-employed. However, many people have questions when setting up this type of account. Here are a few frequently asked questions regarding the solo 401k.
Do I Have to Submit Anything to the IRS?
Many people are familiar with traditional 401k's and the yearly requirements to submit statements to the IRS. With a solo 401k this will not be a problem for most people. Until your 401k account balance reaches $250,000, you will not have to send anything to the IRS on a yearly basis.
What Are the Maximum Contribution Limits?
When you set up a solo 401k, you will be able to contribute to your account in two different ways. You can contribute up to $16,500 of your income just like you would with a traditional plan. This number jumps up to $22,000 if you are over the age of 50. You will then be able to contribute up to 25% of your income if you have a corporation or 20% if you are a sole proprietor.
Are There Any Fees Involved?
Typically, you will have to pay a nominal annual fee to your broker. However, there are some options out there that do not require an annual fee. Check with your provider for the details.
