What is an individual or a solo 401(k)? Also called as Uni-401(k) plan, an individual 401(k) plan is an Internal Revenue Code (Section 401) approved a qualified plan for retirement which is specifically designed for self-employed or sole-owned businesses. Similar to traditional IRAs, this plan offers cost-effective and tax-efficient investment options along with a few additional benefits.
A 401(k) is a deferred tax saving plan where the employees of an organization/business save a part of their salary in 401(k) funds, for which she/he will not be required to pay taxes until the age of retirement. Here, both the employer and the employee will be allowed to make contributions into the fund.
The 401k is one of the most widely-used retirement savings accounts. It is established by the employers for their employees to meet their retirement goals. 401k is eligible for tax benefits as it is a qualified plan. As of 2017, under the 401k plan, the maximum pre-tax contribution that an employer or any person can make to their plan is $18,000.
A 401(k) retirement plan is one of the best tools for working people and employees of a company for creating a secure retirement fund. For employees, the advantages are pretty obvious earnings and contributions to the 401(k) are tax deferred and secondly, employers tend to provide matching contributions to the 401(k) account (ranging from 0-100% of employee contributions).
Few misconceptions cleared about 401(k) Retirement Plan
Not all 401(k) plan participants are completely educated about their 401(k) plans and really do have a lot of misconceptions about it. So how much do you really know about your 401(k) plan? Let’s find out. The entire 401(k) account is mine when I quit the job : This is one of the biggest mistakes one could make in his/her 401(k) retirement planner.
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