A Self-Directed 401K
A Self-Directed 401K, also known as an Individual 401K, Solo 401K, Self-Employed 401K, or SoloK, is a retirement account designed to specifically support businesses that solely employ the owner, their spouse, and business partners.
Self-directed 401Ks are for corporations, incorporated and unincorporated businesses, partnerships, and sole proprietorships. Requirements for qualified contributions to a Solo 401K are simply that the contributor receives a salary or wage.
The business must also not have any additional staff or employees other than the spouse of the plan holder or the business’s partners.
Meeting the IRS mandated qualifications offers high 401K contribution limits along with the possibility of tax deductions.
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How Solo 401K Contributions Work
This retirement plan type has two components based on your role as both employee and employer:
Elective salary-deferral contributions
This type of contribution can be made up of up to 100% of the employees’ compensation.
The employee can contribute up to $19,500 for 2021, or $26,000 for 2021 if age 50 or over, plus;
Employer nonelective contributions
These nonelective employer contributions can be upwards of 25% of total compensation (as defined by the plan) but are calculated differently for self-employed (see below).
The total amount for Solo 401K plan contributions cannot exceed $58,000 for 2021.
Catch-up contributions allow for individuals age 50 or over to contribute a total of $63,500 for 2021.
Contributions for Self-Employed Individuals
The IRS provides a way to calculate an individual’s own Solo 401K contribution limits. They state the following:
“When figuring the contribution, compensation is your “earned income,” which is defined as net earnings from self-employment after deducting both:
One-half of your self-employment tax, and;
Contributions for yourself.”
How Does Accuplan Improve A Self-Directed 401K?
Accuplan Benefits Services allows you to do more with a self-directed 401K. Most retirement accounts, be it a Roth, Traditional, or Solo 401k, rely on stocks and bonds as the investment option. The IRS allows many more asset types than simply stocks and bonds.
With us as your provider, you can set up a self-directed 401K and invest in tangible assets like real estate or gold or paper assets like private equity or loans. A self-directed retirement account allows you to take control of your retirement account and invest in what you want. With Accuplan, the possibilities are endless.
Learn more about Accuplan’s history.
Frequently Asked Questions
Real estate is one of the most popular assets that Accuplan’s clients invest in. We also see investments in cryptocurrency, tax liens, private equity, and so much more. The list for what is not prohibited by the IRS is much shorter and is found here.
The big-name custodians or brokerages you know usually fall under one of three reasons:
- They don’t understand alternative assets and find them bothersome.
- They don’t make money off offering these assets. They’re mainly interested in commissions to be earned off mutual funds or bonds.
- There are only a handful of actual full-service self-employed 401K providers.
Accuplan Benefits Services has streamlined our process for opening an alternative investing account. Our application takes just 5 minutes, and our knowledgeable staff processes each application, rollover, transfer, or request within minutes of receiving.
Get in contact with one of our experts here, and start investing in the alternative today.
Yes, an account holder can indeed contribute to a 401K and an IRA, but it’s important to note that the contributions made to the IRA might not be fully tax-deductible since contributions are also being made to the Solo 401K. The deciding factor will be the account holder’s AGI that determines eligibility to deduct the IRA contributions. es, an account holder can indeed contribute to a 401K and an IRA, but it’s important to note that the contributions made to the IRA might not be fully tax-deductible since contributions are also being made to the Solo 401K. The deciding factor will be the account holder’s AGI that determines eligibility to deduct the IRA contributions.