The Individual or Solo(k) Plan is the Cadillac of Retirement Plans for Small Business

If you search the IRS Website for the term Solo(k) you will get 0 hits.  Solo(k), Individual (k), Roth 401(k) and a few other marketing terms are used to describe a 401(k) that is sponsored by a sole proprietor. A few examples are a business owned by a husband and wife (with no employees working more than 1000 hours per year), or any Solo practitioner in a profession.  Many Doctors and Dentists are Solo Practitioners, most Mortgage and Real Estate Brokers were self employed and still are.  Some CPA's and Financial Planners go Solo with good results. Any small business owner that is profitable can benefit from having a Solo(k) plan in place

A so called Solo(k) is the simplest form a 401(k) plan can take, since the sole proprietors are both employer and employee. One side benefit of the Pension Protection Act of 2006 (January 1, 2006) was the addition to 401(k) plans of a Roth (non-deductible contributions, tax free distributions) component. This new twist gives real saving power to the owners of Solo(k) plans, plus the option to decide if they want to make tax deductible contributions into a tax deferred account or make after tax contributions into a Roth account inside the Solo(k).  They can even split contributions in any way that best fits their current tax situation!

By adding the ability for a 401(k) plan sponsor to include a Roth component, the Federal Government is indirectly acknowledging that Americans are not saving enough for the future.

The Solo(k) combines the best features of the traditional 401(k) with the best features of the Roth IRA and is especially beneficial for high income individuals. Since a 401(k) offers significantly higher contribution limits than an IRA, qualified individuals and couples that need to catch up on retirement plan savings are best served by a Solo (k).

Who Can Benefit?

• Real Estate Agents/Brokers
• Sole Practitioners (Doctors, Dentists, Nurses)
• Consultants and Contractors
• Lawyers practicing Solo
• Electricians
• Entrepreneurs
• Real Estate Sole Proprietors (Individuals or Couples that own Cash Flow Real Estate can use a 761(f) election on Income Tax Returns and use cash flow from real estate to make contributions to a Solo (k) 

What are the Contribution Limits in 2009?

As you can see, a Solo (k) is a very flexible Retirement Plan and is available as a Self Directed Plan with Checkbook Control.  The custom documents that create these plans can also include Loan Provisions and Distributions as early as age 55.

If you are considering a rollover from an existing IRA, take a look at this matrix: