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Individual(k) Small Business 401k

What is Individual(k)?

As a small-business owner you need to be able to save for retirement on your schedule without worrying about government mandated timelines or overly complex forms. An Individual(k) allows you to have the flexibility to contribute when you want without the hassle of complex vesting schedules, rigorous discrimination tests, or the liability of filling out your annual 5500 report to the IRS incorrectly.

<strong>Why do you want an Individual(k)?</strong>

Why do you want an Individual(k)?

Individual(k) allows business owners to contribute to their retirement plans on a scale that until recently only large employers had access. This plan is designed for owner-only businesses and covers only owners and their spouses with earned income. Once a full-time employee (one who works 1,000 or more hours a year) is hired, other plan designs must be considered.

An Individual(k) has many advantages over other types of retirement plans

Eligibility

Eligibility

  • C corporations, S corporations, partnerships, sole proprietorships, LLCs, and LLPs are eligible for Individual(k) plans. However, the business must employ only the owner and/or spouse, and have no other full-time employees, must have earned income.
  • For unincorporated business owners, earned income means net business income; for incorporated business owners, it means the owner or spouse draws a salary or wage (i.e., W-2 income).
  • Individual(k) covers only owners and their spouses. Once a full-time employee (one who works 1,000 or more hours a year) is hired, other plan designs must be considered.

Annual Contribution May Include:

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Up to $20,500 in salary deferrals

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Up to 25% of your salary in profit-sharing contributions (20% of adjusted gross income if business is unincorporated)

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An additional $6,500 contribution if age 50 or over

Additional Individual(K)’S Benefits

Contribute More

Contribute More

Allows for larger contributions than SEP-IRA, SIMPLE-IRA, or profit-sharing plans

Consolidate

Consolidate

Consolidate your savings by rolling over funds from other qualified plans such as a 401(k), SIMPLE-IRA, * Traditional IRA, SEP-IRA, Keogh profit-sharing or money purchase plan to one place.

Simplify

Simplify

The plan is easy-to-administer and low-cost with no vesting schedules or rigorous discrimination tests.

Loans

Loans

Access to your money, you can take a loan for up to 50 percent of your balance, up to $50,000.**

Tax Benefits

Salary Deferrals

Salary Deferrals

Salary deferrals to a traditional 401(k) are made on a pre-tax basis, and your profit-sharing contributions to the plan are tax deductible. Earnings accumulate tax deferred.***

Roth 401(k)

Roth 401(k)

You can also opt to make an after-tax contributions to a Roth 401(k)). The Roth 401(k) is similar to the traditional 401(k), but your money is taxed when it is contributed. In return, your money won’t be taxed when you start using it in retirement.

Accumulate Tax Free

Accumulate Tax Free

Assets accumulate tax free and qualified distributions are tax free .

The Individual(k) allows for three options for how your investments are handled.

1

1

Our financial planner manages your plan based on your risk tolerances and preferences.

2

2

Goals based investments that use portfolios to invest in assets that meet your risk for retirement or other financial goals.

3

3

Self-Directed option allows you to control where you invest your plan.

The IRS webpage for this plan can be found at: https://www.irs.gov/retirement-plans/one-participant-401k-plans

*Some restrictions may apply to SIMPLE-IRA plans.

**Roth Contributions are not available to be withdrawn as a loan, even if your plan permits plan loans. Please refer to your plan document for a complete description of benefits and limitation regarding loans.

***Unless an exception applies, if you take a distribution of earnings before you reach age 59½ and before the account is five years old, the earnings may be subject to taxes and penalties.


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