| Anyone working as their own boss knows the | | | | sole proprietor, an independent contractor, or someone |
| importance of careful strategy and planning in building a | | | | in a limited liability company, corporation or partnership. |
| successful business enterprise. It is just as critical, | | | | However, the actual self employed 401(k) limits should |
| however, for such individuals to dedicate significant | | | | be considered in light of the type of allocations desired |
| attention to researching and choosing a retirement plan. | | | | by the taxpayer. Contributions can take the form of |
| Gaining an understanding of self employed 401(k) limits | | | | after-tax Roth allocations, or they can be tax-deferred |
| is a valuable way to become familiar with one of the | | | | before tax amounts. It is also possible to combine the |
| best retirement vehicles for independent businessmen | | | | two types of contributions. Roth contributions grow on |
| and women with no employees. | | | | a tax free basis and are not taxed upon withdrawal. |
| An outgrowth of the Economic Growth and Tax | | | | Tax-deferred contributions are deductible on the front |
| Relief Reconciliation Act of 2001, solo 401(k) plans | | | | end and the principle and earnings are taxed upon |
| were designed to assist independent entrepreneurs | | | | withdrawal. |
| with retirement planning by giving them access to the | | | | Top end self employed 401(k) limits will be determined |
| type of tax deferred savings enjoyed by wage | | | | by the organization type of the business involved, and |
| earners. Basic background information regarding self | | | | capped at an amount that fluctuates yearly. Sole |
| employed 401(k) limits is a good place to begin any | | | | proprietors in 2009 can contribute up to $49,000, and |
| investigation of retirement options for independent | | | | those over age 50 can allocate up to $54,000. Non |
| business owners. | | | | incorporated businesses, including sole proprietorships, |
| Solo 401(k) plans are a frequently recommended | | | | are characterized by the ability to make salary deferral |
| option for independent business owners, as they are | | | | and profit sharing contributions based on net earned |
| comparatively uncomplicated and can be administered | | | | income amounts. For the 2009 tax year, the salary |
| at a low cost. These plans are not very different from | | | | deferral limit amounts to 100% of the first $16,500 of |
| other kinds of 401(k), but have several aspects that | | | | income earned through self employment activities. This |
| are more relaxed because the only participants are | | | | amount is increased to $22,000 if the taxpayer is over |
| the entrepreneur and perhaps their spouse. Co-owners | | | | the age of 50. The profit sharing contribution amount is |
| or partners of the business and their spouses are also | | | | capped at 20% of self employment income. Such |
| permitted to contribute to these plans. Contributions to | | | | contributions are exempt from income tax, though self |
| this type of retirement vehicle can often be larger than | | | | employment taxes will still apply. Incorporated |
| might be available under other plans, due to the nature | | | | businesses have a different limit for profit sharing |
| of self employed 401(k) limits. | | | | contributions, which will be limited to 25% of the |
| Self employed 401(k) plans can be utilized by any solo | | | | corporation's income, up to the aforementioned overall |
| operator, whether a business owner, a freelancer, a | | | | limit. |