{"id":27530,"date":"2019-11-05T05:28:46","date_gmt":"2019-11-05T13:28:46","guid":{"rendered":"https:\/\/goldco.com\/?p=27530"},"modified":"2022-12-28T10:40:07","modified_gmt":"2022-12-28T18:40:07","slug":"start-individual-401k-without-employer","status":"publish","type":"post","link":"https:\/\/goldco.com\/start-individual-401k-without-employer\/","title":{"rendered":"How to Open an Individual 401(k) Without an Employer"},"content":{"rendered":"

For decades most people assumed that they would find a job after college, work hard for 30-40 years, and retire comfortably with a pension. But that assumption has long since gone by the wayside. Pensions are largely a thing of the past in the private sector, job stability is not what it used to be, and retirement saving is now almost solely the responsibility of employees themselves.<\/p>\n

Not only do people today hop from job to job more often than in the past, many more are even joining the ranks of the self-employed. While there are many advantages to being your own boss, there are numerous drawbacks too.<\/p>\n

First and foremost among them is that by being self-employed, you don\u2019t have access to retirement plans that employees at many companies do. A workplace 401(k), employer matching, and all those other benefits are something that you don\u2019t have when you work for yourself. But if you thought you wouldn\u2019t be able to take advantage of tax-advantaged retirement savings options as a self-employed person, you\u2019d be wrong.<\/p>\n

Those who are self-employed are eligible to set up what\u2019s known as a solo or individual 401(k). It\u2019s essentially a 401(k) plan just for you, and investing in it allows you many of the same benefits as those who invest through a workplace 401(k) plan. If you\u2019re self-employed and wondering how to start saving for retirement, you might look into setting up a solo 401(k) plan for yourself.<\/p>\n

What Is a Solo 401(k)?<\/h2>\n

A solo 401(k), or individual 401(k), is a 401(k) plan that is set up for an individual self-employed person. It\u2019s also known as a one-participant 401(k). In order to qualify to set up a solo 401(k) plan, you must be self-employed, and you must be the sole employee of your business. Once you start hiring employees, you\u2019ll have to offer them access to your 401(k) plan if they\u2019re eligible.<\/p>\n

Contribution limits for individual 401(k) plans are similar to those for employer-sponsored 401(k) plans. Your employee contributions are limited to $19,000 in 2019, or $25,000 if you\u2019re over the age of 50. Your business may also contribute up to 25% of your compensation, up to a total combined employer\/employee contribution of $56,000 (or $62,000 for those over age 50.) Contribution limits generally increase each year, and the new limits for the following tax year are normally published in early November.<\/p>\n

As with any financial investment, though, you\u2019ll want to consult a financial adviser and a tax adviser to make sure that your contributions are consistent with IRS guidelines and that you\u2019re doing everything by the book.<\/p>\n

Benefits of Setting Up a Solo 401(k)<\/h2>\n

While not having a traditional employer-sponsored 401(k) plan can have some drawbacks, there are some benefits as well.<\/p>\n

Benefits<\/h3>\n