Self Employed 401k

The Self Employed 401k is commonly used to refer to the Individual 401k. Self Employed 401k plans were developed due to the passage of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) that went into effect January 1st, 2002. The new law made several changes to the existing rules of 401k plans. These changes made the Self Employed 401k a very attractive self employed retirement plan due to it's advantages. 

Simply stated there are 2 primary advantages of the Self Employed 401k versus other self employed retirement plans.

1. Potentially greater retirement contributions at the same income level, therefore maximizing retirement contributions and valuable tax deductions.
    
2. The option of a tax free self employed loan using the 401k's balance as collateral for the loan.

Self Employed 401k Contribution Limits

The maximum self employed 401k contribution limit in 2009 is $49,000 or $54,500 if age 50+ (2008 limits are $46,000 or $51,000 if age 50+). Because of the way the contribution is calculated a larger contribution usually can be made into a Self Employed 401k than to a Keogh or SEP IRA at the same income level. Therefore the Self Employed 401k is usually the best option for maximizing retirement contributions and valuable tax deductions while reducing income taxes.

Self Employed Loan using the 401k

Another advantage of the Self Employed 401k versus other self employed retirement plans is the ability to receive a loan using the balance of the Self Employed 401k as collateral.

Learn more about how to obtain a loan using the Self Employed 401k.

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Disclosures:

*  The information on this page is for informational purposes only and does not constitute, and should not be construed as, professional, legal or tax advice. To determine your individual tax situation and specific needs, please consult a professional tax advisor.

* Information contained in these sections merely highlight some benefits. There are risks involved with all investments that could include tax penalties and risk/loss of principal.