Solo 401(k)s 

A Solo 401(k) account offers retirement planning options including enhanced contribution amounts and exceptional tax benefits for sole proprietors of small businesses. And, as with IRAs, there is opportunity to custody both traditional and alternative investments. Millennium Trust provides Solo 401(k) administrative and custody services with personal service and professional quality.

For sole proprietors, the Solo 401(k) offers the same plan options, contribution limits and flexibility available in 401(k) plans for companies with multiple employees. As a result, single-owner businesses can put away more money for retirement in a shorter amount of time using a combination of salary deferral and profit sharing contributions to fund the plan.

Many sole proprietors have chosen to open a Solo 401(k) for the following key benefits:

  • Complete Contribution Flexibility – the business owner decides each year whether to contribute, and how much
  • Higher Contribution Limits – tax-deferred contributions can be up to three times that offered by other types of retirement plans
  • Easy Set Up – no complicated administrative requirements
  • Consolidation Convenience – ability to consolidate assets from Traditional IRAs or other retirement plans into a Solo 401(k)
  • Ability to Borrow – owners can borrow up to the lesser of $50,000 or one-half of the Solo 401(k) balance. The loan can be used for any purpose, and is tax-free and penalty free, as long as it is paid back on time.

The benefits of the Solo 401(k) were recently enhanced by the passage of federal legislation allowing Solo 401(k) contributions to be earmarked as Roth 401(k) contributions. This new law allows the opportunity for tax-free withdrawals/distributions after age 59-1/2 provided certain conditions and requirements are met. See Roth Solo 401(k) for more information

Unlike IRAs, the Solo 401(k) permits investments in life insurance and “S” corporations, as well as offering the ability to avoid Unrelated Business Income Tax, or UBIT, when using leverage with a non-recourse loan to purchase real estate. Opening a Solo 401(k) with Millennium Trust offers the added benefit of options in traditional and alternative investments. 

Millennium Trust encourages business owners considering a Solo 401(k) to consult with an attorney or tax advisor.