This is
G&G Associates Tax & Financial Consulting
e-Newsletter
Solo 401(k) Annual Contribution Limits To Increase In 2017
G&G Readers,
A Solo 401(k) plan is an IRS-approved
retirement plan that is suited for business owners who do not have any
employees, other than themselves and perhaps their spouse. The
“one-participant 401(k) plan” or Individual 401(k) Plan is not a new
type of plan. It is a traditional 401(k) plan covering only one
employee. Unlike a Traditional IRA, which only allows an individual to
contribute $5500 annually or $6500 if the individual is over the age of
50 in 2017, a Solo 401k Plan offers the Plan participant the ability to
contribute up to $60,000 each year.
Before the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) became effective in 2002, there was no compelling reason for an owner-only business to establish a Solo 401(k) Plan, because the business owner could generally receive the same benefits by adopting a profit-sharing plan or a SEP IRA. After 2002, EGTRRA paved the way for an owner-only business to put more money aside for retirement and to operate a more cost-effective retirement plan than a Traditional IRA or 401(k) Plan.
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One of the main benefits of a Solo 401(k) Plan is the opportunity to make higher annual contributions in pretax, after-tax or Roth. A Solo 401(k) Plan includes both an employee and employer profit-sharing contribution option, whereas a Traditional IRA has a very low annual contribution limit and a SEP IRA has only an employer profit-sharing contribution option. Under the 2017 Solo 401(k) contribution rules, a plan participant under the age of 50 can make a maximum annual employee deferral contribution in the amount of $18,000. That amount can be made in pretax, after-tax or Roth. On the profit-sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single-member LLC) annual profit-sharing contribution up to a combined maximum, including the employee deferral, of $54,000, an increase of $1,000 from 2016.
For plan participants over the age of 50, an individual can make a maximum annual employee deferral contribution in the amount of $24,000. That amount can be made in pretax, after-tax, or Roth. On the profit-sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single member LLC) annual profit-sharing contribution up to a combined maximum, including the employee deferral, of $60,000, an increase of $1,000 from 2016.
The Solo 401k plan is unique and so popular because it is designed explicitly for small, owner-only businesses. The many features of the Solo 401(k) plan discussed above are why the Solo 401(k) Plan or Individual 401(k) Plan is so appealing and will continue to be popular among self-employed business owners in 2017 and beyond.
Before the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) became effective in 2002, there was no compelling reason for an owner-only business to establish a Solo 401(k) Plan, because the business owner could generally receive the same benefits by adopting a profit-sharing plan or a SEP IRA. After 2002, EGTRRA paved the way for an owner-only business to put more money aside for retirement and to operate a more cost-effective retirement plan than a Traditional IRA or 401(k) Plan.
-------------------------------------------------------------
Internal Sponsorship:
Want to Know How To Protect your Cash
To become a member of the G&G Investment Society (GGIS) newsletter subscription to learn how to take advantage of some of our suggestions so you can protect your wealth and portfolio against a fallen dollar, send an e-mail to GGIS@gngassoc.com and/or visit our website at www.gngassociates.net and click on the “Products & Services” link and we’ll get you signed up right away.
DON'T WAIT ANOTHER DAY!
- 1 year subscription - $149
- 2 year subscription - $269
- Lifetime subscription - $699 {50% off tax prep & 25% off consulting services for life}
*** Membership Guarantee *** If you don't make your money back from being a GGIS member by the end of your subscription...we'll refund 100% of your subscription fee back. That's how confident we are that this will be one of the best financial moves of your life.
-------------------------------------------------------------
One of the main benefits of a Solo 401(k) Plan is the opportunity to make higher annual contributions in pretax, after-tax or Roth. A Solo 401(k) Plan includes both an employee and employer profit-sharing contribution option, whereas a Traditional IRA has a very low annual contribution limit and a SEP IRA has only an employer profit-sharing contribution option. Under the 2017 Solo 401(k) contribution rules, a plan participant under the age of 50 can make a maximum annual employee deferral contribution in the amount of $18,000. That amount can be made in pretax, after-tax or Roth. On the profit-sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single-member LLC) annual profit-sharing contribution up to a combined maximum, including the employee deferral, of $54,000, an increase of $1,000 from 2016.
For plan participants over the age of 50, an individual can make a maximum annual employee deferral contribution in the amount of $24,000. That amount can be made in pretax, after-tax, or Roth. On the profit-sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single member LLC) annual profit-sharing contribution up to a combined maximum, including the employee deferral, of $60,000, an increase of $1,000 from 2016.
The Solo 401k plan is unique and so popular because it is designed explicitly for small, owner-only businesses. The many features of the Solo 401(k) plan discussed above are why the Solo 401(k) Plan or Individual 401(k) Plan is so appealing and will continue to be popular among self-employed business owners in 2017 and beyond.
Planning and saving for retirement
does not have to be painful. Understanding the rules and employing a
consistent approach can help increase retirement savings while simultaneously
reducing ones tax liability. However, a few simple retirement planning moves
can help make the difference when April 17, 2018 rolls around.
One of the benefits of being a client with G&G Associates is that you'll get a free 30 min pre-tax preparation session to make sure you are gathering your documents appropriately before you submit your documents for tax preparation.
So, contact us today to file your return and/or schedule an appointment.
Visit our website for more information and free online webinar classes to help you make sure you are audit proofing your records, or contact us today to set your appointment if you need a “TAX” OR “FINANCIAL” one-on-one consultation.
Until the next time!
Tua (Thank You),
Asar Maa Ra Gray
Tax, Financial & Veteran Consultant
G&G Associates
757-271-6068 office
866-361-3872 toll free fax
www.gngassociates.net
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