Solo 401(k) Pros and Cons

by | Sep 21, 2022 | Spousal IRA | 21 comments

Solo 401(k) Pros and Cons




If you own a small business, you have options when it comes to your retirement account, such as a Solo 401(k).

Access the Ultimate Guide to the Self-Directed Solo 401(k):

John Bowens outlines the pros and cons of a Solo 401(k).

Solo 401(k) Eligibility Requirements
The Individual 401(k) is for incorporated and unincorporated businesses, sole proprietorships, partnerships, and corporations. The only requirement for contributions to this plan is that you receive a salary or wage.

The business entity must have no additional employees other than the spouse of the proprietor—or, in the case of a partnership, the only employees must be self-employed partners and their spouses.

An Individual 401(k) plan must be the only arrangement maintained by the business that is not included as part of a controlled group under federal tax law.

Equity Trust Company is a directed custodian and does not provide tax, legal or investment advice. Any information communicated by Equity Trust Company is for educational purposes only, and should not be construed as tax, legal or investment advice. Whenever making an investment decision, please consult with your tax attorney or financial professional….(read more)


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21 Comments

  1. Soul Adventures

    Excellent information. Does I pay Social Security and Medicare on my contribution to a Solo 401K through my W2?

  2. Nina Chan

    you are confused me with 20% . First you said net income $20000 can contrib $19500 the you said 20%? please explain in detail calculation.

  3. Log Out Jason

    can i do this as a sole proprietor or do i need an s corp?

  4. Cristan Vergottini - Cohen

    what happens if i set up a solo 401k and i end up A) end up hiring employees down the line. B) closing down my business at some point in time?

  5. FlaschDJ

    I am 68 and self-employed.
    Learning about Solo 401k suggests the following strategy to me.
    Comments will be greatly appreciated.
    ————-
    Business profits + SS + IRA WDs (voluntary or RMD) push me into higher brackets.
    To remain in lower brackets, I’ll make MAGI-reducing contributions to a Solo 401k.
    1)_Is this permissible?
    2)_Is this sensible?
    This strategy seems to afford me fine control of my tax bracket.

  6. Gaurav Khanal

    Three questions:

    1.For the solo 401k, in regards to the employer deferral, can that be made with pretaxed money, or is that also made with ordinary money similar to the employee contribution?

    2. Can you have one company where youre the only owner and employee and open an individual 401k, and another company where you have employees and contribute to SEP IRA? So basically contribute to both without the limits being affected?

    3. Can you hire contractors instead of employees to avoid some of the cons of individual 401k (aka 1099 contractors)?

  7. Mr. Morton

    What about salary employee, I have a minor work permit for my son?

  8. Justin Keller

    I have a SEP (three years old) can I covert it and its assets to a solo 401K?

  9. TheTartesos

    How much does it cost to have my solo401k with equity trust company?

  10. Las Vegas Adventures

    Which of the following can you have together ? Solo 401K, Roth IRA, SEP IRA. Can you have all 3?

  11. Andrey Mudik

    Damn, this video is clean. Imma like it just to save it and watch it over in more detail later

  12. BrenttheGreat

    I was getting excited till he said you can’t have employees

  13. Unforeseen Awakening

    If I open a Solo 401k this year but in a few years open a side business (retail shop) that has employees, can I still keep my solo 401k since it will be a completely different business?

  14. matthew hoover

    wow, and I'm sitting here thinking I can only contribute 18k per year total, didn't know that there was an employer deferral. I only have an IRA that I max out but my financial planner is telling me it'd benefit me to take advantage of contributing more to a tax deferred account rather than just putting the rest of it into a managed account with my broker after paying taxes on it. I've been doing it this way so far because I wanted the money to be accessible to me but it's at the point where I have more then enough available for whatever I need (house down payment, for example). I should now really take advantage of the tax deferral.

  15. Tekskills

    Can you have part-time w2 employees that have worked less than 1000 hours per year?

  16. Richard Potts

    This is excellent content. I’m a W-2 (no retirement from employer) and side-hustle and real estate investor trying to find something better than an IRA. Thank you!

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