Self Employed 401 K Plans

Are you a self-employed worker in search of a retirement plan? Numerous financial firms offer 401 (k) and SEP IRA plans for people who are self-employed. If you have no employees, these plans might work for your needs. Three of the top providers of self-employed retirement plans are USAA investment, Vanguard and Charles Carroll. Retirement is an important goal that requires extensive planning, and just because you run your own business doesn't mean you need to be left out in the cold. Read on for important questions and answers that can help you understand your best self-employed 401 (k) plan options.

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Frequently Asked Questions ( 8 )   Add a Question

  1. When is an individual 401 (k) the best option?
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    An individual 401 (k) plan is ideal if you want to put away large sums of money. You can save as both an employer and an employee.

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  2. Who all is eligible to contribute to an 401 (k) for a self-employed person?
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    This is for a self-employed "sole proprietor" who has no employees. Only the account holder can contribute to his or her plan.

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  3. When can self-employed people cash in their 401 (k) plans?
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    Self-employed people must keep their money in their accounts until the age of 59.5 years old. However, there are a few exceptions. For example, people who are buying homes can withdraw from their 401 (k) plans.

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  4. Can money be accessed from self-employed 401 (k) plans?
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    Taking money from your 401 (k) plan before the required age or without an eligible exception may result in full taxation on the withdrawal plus a 10 percent federal fine. However, you can take out a loan on your 401 (k) without incurring a penalty.

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  5. How are self-employed 401k plans taxed?
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    Contributions are made tax-free to 401k plans. You don't take taxes until you eventually withdraw money from your account, at which point the money is taxed as regular income.

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  6. What is a Keogh plan?
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    Keogh plans used to be popular with the high-income group. Now, they have been replaced by IRAs, largely. Many self-employed workers don't fit into this bracket of high-income earners.

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  7. Is online access available with this 401k plan?
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    If you're self-employed, then ease of access is a big deal when choosing a 401 (k) plan, a checking account or any other financial arrangement. Most retirement plan providers have online interfaces for viewing or contributing to your plan. Make sure whichever plan you choose offers this kind of access.

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  8. How are self-employed 401k plans invested?
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    Self-employed 401k plans can be grown over a wide range of investments including mutual funds, bonds, stocks, CDs and more. Each investment option carries its own unique risks and benefits. Talk with account managers at each firm under consideration to find a 401 (k) plan that's a good fit for your needs.

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