Retirement Account for Small Business Owners.

If you are a self-employed business owner, a solo-401(k) may be just the right retirement option for you. The solo-401(k) or Individual (k) gives self-employed business owners the same great retirement benefits that large corporations have enjoyed for years. The solo-401(k) is significantly less complex than a typical 401(k) or other profit sharing plans and in many cases, it allows for much greater tax-sheltered contributions than other traditional types of small business retirement plans.

There are many advantages to having a solo-401(k) over other small business retirement plans, such as SEPs and SIMPLES. First, the contribution limits can be much higher. As the self-employed business owner, you can set aside up to 25% of your income as a tax-deductible, profit sharing contribution. You can also contribute up to $16,500 for 2009 ($22,000 if you are age 50 or older) as a salary deferral. The maximum contribution for an solo-401(k) plan for 2009 is the lesser of $49,000 ($54,500 if age 50 or older), or 100 percent of compensation.

Another advantage to the solo-401(k) is the Roth contributions that you are eligible to make. You can designate some or all of your deferrals as Roth contributions. Roth contributions are after-tax dollars, so those contributions will grow tax-free.

Unlike an IRA, you may take loans from your solo-401(k). Make sure to check with your tax professional to find out the limitations and amounts that you can borrow from your solo-401(k) plan.

Who qualifies? To be eligible to have a solo-401(k), you must be a self-employed business owner with no full-time employees other than your spouse. Employees that work less than 1,000 hours annually, employees under the age of 21, Union employees and Nonresident alien employees are generally excluded from coverage under your company's solo-401(k) plan.

Last, the solo-401(k) is very low in administrative costs. Like an IRA, you will need to first open the plan with a qualified custodian for your solo-401(k), you may act as trustee for your own plan. Once the account is opened, you simply open another checking or savings account in the name of your solo-401(k) plan trust and work with your tax professional to determine how much you can contribute each year. You may also choose to not contribute in any year, for any reason. The solo-401(k) gives you complete flexibility to contribute when you would want. Once your account accumulates $250,000 you'll have to start filing a Form 5500-EZ, which your tax professional should be able to help you prepare.

Feel free to call me and I will be happy to explain in detail how we can set up your solo-401K account. At Adelphi Retirement Management, Inc., we've helped thousands of investors over the years in truly diversifying their retirement proceeds into non-traditional investments in to real estates, businesses, private notes, tax liens, and much more. Why would you put all your eggs in one basket?

Wai-Yew "Andrew" Lam is the founder of Adelphi Retirement Management, Inc., based in Oakland, California. He can be reach at 925-212-1727, please visit our company's website at www.AdelphiRetirement.com.