Going Solo: The Individual(k) Plan
What is an IK account?
Unlike employer sponsored 401(K) plans, most people have never heard of an Individual (k) plan. An Individual 401(k) (or IK) works much the same as traditional 401(k) plans offered by large companies, and resemble the SEP IRA which is designed for the self-employed. However, an IK is designed strictly for sole proprietor business owners with no employees. The IK can be either a traditional and/or Roth version giving you the freedom to choose to either save money on a pretax basis where it can grow tax-deferred or, if you opt for the Roth version, save money post tax and have it grow potentially tax free.
Who can contribute to one?
An individual 401(k) is strictly for sole proprietors who have no employees (although your spouse may open one to contribute if he or she earns income from your business). If you are an employee of a company by day, and work your own home business in your off hours you may also qualify. But that can get thorny very quickly, so be sure to check with your CPA to be certain that you qualify. Want to learn more about an individual 401(k)? Check out our full blog post here: https://ow.ly/KmhX30ka0cr
Are you self-employed or a business owner? How have you approached retirement planning? Share your thoughts and experiences below!