| Sole proprietor small business owners can now invest for retirement like their corporate counterparts: through a 401(k) plan. In the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) that took effect this year, Congress opened the door for sole proprietors to establish 401(k) plans and increased plan funding limits substantially. Victory Capital Management, a subsidiary of Cleveland-based KeyCorp, is one of the first firms to offer a product to satisfy this need with its Individual(k) plan.
The Individual(k) enables self-employed business owners to set aside up to 25 percent of income annually as a discretionary, tax-deductible employer contribution. What makes the Individual(k) so attractive is the ability to set aside an additional $11,000 as a pre-tax deferral contribution, to a combined annual maximum of $40,000. The salary deferral is above and beyond the 25 percent, making the Individual(k) more advantageous than other retirement plan options such as SEPs, profit sharing plans and defined benefit plans.
Participants in the Individual(k) plan also benefit from the opportunity to take out loans from the plan, which is not an option under other IRA-based retirement plans. For individuals who have accumulated retirement plan assets in a previous job, starting a business and establishing an Individual(k) gives the business owner the ability to consolidate assets and then borrow against those assets tax-free. Another great benefit is the plan’s funding flexibility, which does not require contributions every year.
For more information call (888) KEY-2020. |
