The Individual 401k - BIG Business Benefits For The Home Business

Major mutual fund and investment management companies now offer
self employed individuals 401k plans that are easy to install
and administer at very low cost. What's more independent
contractors and small business owners can borrow part of
their retirement savings tax-free and penalty free by taking
advantage of a loan provision in these new plans. Depending
on who's offering them, these individual plans are sold under
different trademarked names such as (solo 401k, uni-k plan,
personal(k), one person 401k, mini-401k, solo-owner 401k,
etc.,.)

Small business owners can establish an individual 401k and
transfer their IRA, 401k, 403b, or other qualified retirement
funds into this new retirement plan. Once the funds are in
the plan, owners can borrow 50% of their 401k account balance
up to $50,000 tax-free and penalty free provided they pay back
the loan.

Any business owner with no employees other than co-owners or
spouses can establish an individual 401 k plan. It doesn't
matter if you are a startup or been in business for years.
Your may work as an independent contractor with 1099 income,
freelancer, sole proprietor, or in a partnership, Limited
Liability Company (LLC), or corporation.
.
It is fairly common for employees of large companies to have
the option to borrow from their 401(k). But before 2002, small
business owners were not allowed the same privilege. Instead,
owners needing to tap their retirement funds for whatever
reasons had to take cash distributions from their IRAs or
other retirement accounts. This required them to pay federal
and state taxes on the distributions, plus generally a 10%
penalty if they were under age 59 ½. They also lost the chance
to put the money back into their retirement accounts.

Borrowing from an IRA is still prohibited. But one can
consolidate his individual retirement accounts into a
401 k and borrow from the 401k.

However, the individual 401 k is more than just a good tool
to borrow money. It also lets you contribute more towards your
retirement. You can make tax-deductible contributions to this
plan at levels more generous than other retirement plans such
as the SEP, SIMPLE, profit sharing and money purchase plans.

Every year millions of Americans start new businesses and take
cash distributions from their retirement accounts to keep them
solvent until the business gets going. In the process these
entrepreneurs forfeit a large chunk of their retirement money
to taxes and penalties. From now including a 401 k search will
probably become routine whenever small business owners look
to set up a retirement plan. With all of its features, the
individual 401(k) is bound to be a serious contender when it
comes to choosing a small business retirement plan.

by: Janet L. Hall

No matter what your age or years of work, it’s almost never too late to start planning for your retirement. As a matter of fact, the younger you are, the less chance you will have of becoming destitute, or a * bag * person. I’m not trying to be funny, it can happen to you if you don’t watch what you are doing and PLAN for the future.

Ponder for a minute on the questions below:

~~ What kind of life do you want in your * golden years *?
~~ How will you use your retirement time, meaning, what activities, interests, or travel might you want to pursue?
~~ Will you need or want to change your housing and lifestyle completely or do you hope you can * stay where you are, doing the same things you’ve always done *?
~~ If you are planning on living in a different area, what are the standards of living in that area OR what are the chances of the standard of living increasing or decreasing where you are currently living?
~~ How might your health affect your retirement?
~~ Will you need to continue to work part-time after retirement to * make ends meet *? How will that affect your benefits?
~~ Do you want to start your own business, many people do after retirement, and how will that affect your benefits?
~~ What * support * systems do you have or need to have in place?

If a company employs you, you need to FIND OUT:

~~ if they have a retirement plan (benefits), such as a pension or 401(k)
~~ what your TOTAL monthly or lump sum disbursement will be
~~ how much you can contribute
~~ length of service required to be eligible to collect benefits
~~ age required to be eligible to collect benefits
~~ if the plan will meet your needs/lifestyle after retirement

Take the time and schedule an appointment with your employer’s * benefits person * and discuss YOUR retirement plan. Ask them about YOUR Statement Of Accrued Benefits (SAB). This is YOUR personal account and will tell you the benefits you can expect based on your salary and retirement time.

If you’re self-employed, as many of us are, you need to establish your own retirement plan. The easiest plan is an IRA at which you can only contribute $2,000 yearly. If you’re young (years away from retirement) check out a non-deductible Roth IRA. Other plans include SIMPLE, SEP-IRA, and Keogh Plan. If you want to learn more about these plans, check our Reviews section near the end of the newsletter.

Please don’t think you can live on Social Security (in the USA) alone! If you have no idea what you MIGHT have already accumulated into Social Security, FIND OUT! (Link for SSA in Reviews section)

WARNING and a TIP: Just when you thought you were covered! One thing that can zap you financially is a divorce (I hope this never happens to you) and your pension plan could be one of your largest assets to be DIVIDED up (I’ve seen this happen). SO, if you’re married, I sincerely hope you stay so happily and forever after!

Smiles, not Piles,
Janet L. Hall
Professional Organizer, Author, and Speaker
http://www.overhall.com
"If your current systems aren't working for you...
get an "OverHall"!"

The Organizing Wizard, Janet L. Hall, is a Professional
Organizer, Speaker, and Author. She is the owner of
OverHall Consulting, and Organizing By Phone. Subscribe to
her FREE organizing newsletter at
http://www.overhall.com/newsletter.htm or visit
her web site at http://www.overhall.com

Copyright (c) 2000 by OverHall Consulting
P.O. Box 263, Port Republic, MD 20676
All Rights Reserved. Permission is granted to
reproduce, copy, or distribute OverHall IT! or any articles
by Janet L. Hall so long as article(s) is kept intact, this
copyright notice, and full information about the author is
attached.