Solo 401(k) (One-Participant 401(k)) Flashcards
1️⃣ What is a Solo 401(k)?
➡️ A retirement plan designed for self-employed individuals and small business owners with no employees (except a spouse).
2️⃣ Who is eligible to set up a Solo 401(k)?
➡️ Self-employed individuals or business owners with no full-time employees, except a spouse.
3️⃣ Can a business with employees have a Solo 401(k)?
➡️ No, unless the only employee is the owner’s spouse.
4️⃣ What types of businesses can establish a Solo 401(k)?
➡️ Sole proprietorships, LLCs, S-corporations, and partnerships.
5️⃣ What is the total contribution limit for a Solo 401(k) in 2024?
➡️ $69,000 (or $76,500 for those 50+ with catch-up contributions).
6️⃣ How does a Solo 401(k) allow contributions as both an employer and employee?
➡️ The individual contributes as an employee (salary deferral) and as an employer (profit-sharing).
7️⃣ What is the maximum employee contribution in 2024?
➡️ Up to $23,000 (+$7,500 catch-up for those 50+).
8️⃣ What is the maximum employer contribution in 2024?
➡️ Up to 25% of compensation (or 20% for sole proprietors).
9️⃣ Can a Solo 401(k) be set up as a Roth account?
➡️ Yes, contributions can be either Traditional (pre-tax) or Roth (after-tax).
🔟 Are Solo 401(k) contributions tax-deductible?
➡️ Yes, Traditional Solo 401(k) contributions lower taxable income.
1️⃣1️⃣ When can you start taking penalty-free withdrawals?
➡️ At age 59½.
1️⃣2️⃣ Are required minimum distributions (RMDs) required for a Solo 401(k)?
➡️ Yes, RMDs begin at age 73 (as of 2024), unless it is a Roth Solo 401(k).
1️⃣3️⃣ What form must be filed if a Solo 401(k) has more than $250,000 in assets?
➡️ IRS Form 5500.
1️⃣4️⃣ Can you take a loan from a Solo 401(k)?
➡️ Yes, up to $50,000 or 50% of the account balance, whichever is lower.
1️⃣5️⃣ What is one major advantage of a Solo 401(k) over a SEP IRA?
➡️ Solo 401(k) allows higher contributions at lower income levels and offers a Roth option.
