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Solo 401k
It is a fact that there are several problems faced by self employed from time to time because of any environmental changes or dynamism in the corporate sector. To add their woes there is a huge burden of tax on self-employed people. In order to make the self-employed people relieved from the burdens of tax, it was some years ago the changes in the tax-law were done. The Solo 401K was the result of that change of tax-law, which revolutionized the whole of the self employment sector. The impact of Solo 401K was so extreme that it is termed as a revolution especially in the retirement saving sector. The biggest advantage of Solo 401K plan was that now the self employed people are free to save a large amount of money for their retirement, that too without the fear of paying huge taxes on them. Now they can make larger deductible contributions and that too annually. In order to avail all such benefits, what all is required is just to cut down one's annual income tax bills in order to make the process go on. There are several other plans like traditional small- business retirement plans like Keogh or SEP and other profit sharing plans that enable people to contribute to the annual deductible contribution which is as much as equal to 25% of one's compensation. This figure is for the ones who are businessmen or who have their own corporations. In case one is a self-employed or is a sole owner, then this figure is 5% less i.e. 20% of one's self employment income. Thus, it can be stated that the corporation owned by sole proprietor pays as much as ,000 by way of salary. As it is a human nature to have more and more, in the same manner it is but obvious that everyone wants to have more and more into the tax-favored retirement program as this not only helps in providing good amount of money together but also ensures tax reduction on the same. Thus by this way one pays more and gets more. For those who want to maximize their contributions to a deductible retirement account, the Solo 401K is a boon. The annual contribution with Solo 401K gets segregated into 2 parts and this segregation itself is very advantageous for a person as he/she could ensure his/her contribution up to 100% of the first ,500 of his/her 2008 compensation or ,500 in case of the self-employment income of the person of the age of 50 or older than that at the end of the assessment year. In addition to above one could even contribute and deduct an additional amount as much as up to 25% of his/her compensation income and 5 % less in case if self-employment income. Thus Solo 401K is surely a boon for you!
Retirement - Retirement Plans and Savings Plans from CNNMoney
Retirement savings strategies & advice, calculators to plan your retirement, 401K tips and more from CNNMoney.com
In order to solve the problem of retirement most effectively, the 2006 law has made it much easier for the workers to take their retirement money without any haste. For the year 2006 the 401k Contribution Limit was ,000 and the catch up contribution limit for the year 2006 for those who were more than 50 years of age was ,000. It was in 2005, that the range of ,000 (extreme limit) by way of pre-tax contributions was made to plans sponsored by employers. It is even possible that the employers can decide by their own on the amount of contribution made by them for their employees. |
