Self-Employed 401(k) Basics

One of the most powerful types of self-directed retirement accounts is the self-employed 401(k). It’s long been called the “individual 401(k)” or the “solo 401(k),” but the term “self-employed 401(k)” works very well, because it’s an excellent vehicle for anyone with self-employed income.


It works like anyone else’s workplace 401(k) plan, except the self-employed individual has complete control: You design it, you establish the plan rules, you decide on your own salary deferrals and your own matching contributions as your own employer.


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Who is eligible?


You may contribute to a self-employed 401(k) if you are a self-employed sole proprietor or business owner with no employees other than yourself and/or spouse.


If you are the owner-employee of a partnership, C corporation or S corporation or LLC, you can also establish a self-employed 401(k), again, as long as you have no employees other than yourself and/or a spouse.


How Much Can I Contribute to a Self-Employed 401(k)?


When it comes to contributions for self-employed 401(k)s, you wear two hats:

For tax year 2017, you as your own employee you can defer up to $18,000 in your self-employed 401(k) plan in deferred compensation. If you are age 50 or over, you can contribute another $6,000 in “catch-up” contributions, for a total of $24,000. Both numbers are unchanged from 2016.


In addition, since you are your own employer, you can decide on your Self-Employed 401(k) match. Technically, the IRS considers these to be “non-elective” contributions, but since the self-employed or owner-employee of a one-person corporation (possibly with a spouse partner and/or employee) controls everything you can decide on your own match, up to the plan maximum.


For 2017, you can contribute up to 25 percent of your own compensation as defined by your plan, up to a maximum of  $54,000. Both contributions – the employer and employee contribution — are made pre-tax.


What Investments Can I Make in a Sole Proprietor 401(k)?

With American IRA, LLC, you can invest your 401(k) plan in nearly anything you can imagine. While most investment companies restrict you to their approved list of mutual funds, stocks, bonds, money markets and other paper assets, American IRA allows you to invest in alternative retirement assets including real estate, gold, precious metals, private lending, mortgages, hard money lending, micro lending, crowdfunding investments, private equity, venture capital, tax liens and certificates, and much more.


The only exceptions are certain kinds of precious metal bullion of inconsistent or insufficient purity (call us for details), life insurance, alcoholic beverages, gems and jewelry, art and collectibles. You also can’t engage in self-dealing or buy or sell assets from or to your spouse or either of your ascendants or descendants, nor any fiduciary who advises you on your account.


Does a Self-Employed 401(k) Make Sense for Me?


Self-employed 401(k) plans may make great sense if you have a lot of self-employed income and you can contribute significant amounts of money to it over and above an IRA. They may also make sense from an asset protection point of view: Assets in 401(k)s enjoy extremely tight protection against judgments from creditors, and even from the IRS, if the plan is structured properly.


How Can I Get Started?


American IRA, LLC specializes in helping entrepreneurs, business owners establish self-directed 401(k)s, IRAs, Roth IRAs, SEPs, SIMPLE IRAs and other retirement accounts. As a third party administrator, we also ensure your transactions are executed promptly, accurately, and that they are properly recorded and documented and meet all IRS requirements.


To get started, call us today at 1-866-7500-IRA(472), or fill out our application forms at


From there, you just fund the account, and let us know in writing what you want us to buy and sell on your 401(k)s behalf. You find the investments – we take care of the paperwork.


Our offices are in Charlotte and Asheville, North Carolina, but we work with successful self-directed investors all over the U.S.


We look forward to working with you.

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