April 14, 2015
By: Brian M. Clay, CFP®, CMFC® & Darren Northam, CFP®, CMFC®
What is an Individual 401k?
An individual 401k, also called a one-participant 401k plan or a Solo 401k, is a retirement plan for the self-employed. It is for business owners who have no employees other than the owner’s spouse. An individual 401k comes in two versions, traditional or Roth, just as other 401k plans do. If you choose the traditional version, you input money on a pretax basis and pay taxes upon withdrawal. In the Roth version, you input money on an after-tax basis and it is then not taxed upon withdrawal. You can divide your contributions between a traditional and a Roth 401k. Which you should choose depends upon your current and projected tax rates. (more…)
