What Should You Seek Out in a Solo 401k Provider?

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For independent contractors, entrepreneurs, and anyone else who is self-employed; retirement planning can be a stressful process. After all, you don’t have the resources of a large enterprise providing you with retirement planning options. All you have is the fruits of your own labor and whatever else you decide to implement for your business.

One of the best ways for single-member businesses to ensure that they are covered in retirement is to invest in a Solo 401k.

Why Should I Start a Solo 401k for My Business?

Many self-employed individuals elect to start a Solo 401k retirement plan for the following reasons:

  • Tax Options. If you want flexibility in how your 401k contributions are taxed, you’ll be thrilled to hear that Solo 401k plans allow contributors options when it comes to how their money is taxed. Solo 401k plans enable you to choose between Traditional (pre-tax) contributions or Roth (after tax) contributions. For those that want to pay their taxes up front and not have to worry about them down the road, the Roth option is available. However, those that would rather have their money taxed later, in retirement, can choose to make Traditional contributions.
  • Incredible Contribution Maximums. As a single-member company, you are technically both an “employer” and an “employee”. While in most cases, this is an inconsequential detail, when it comes to your Solo 401k, you are able to make contributions in both capacities. As an employer, you can defer as much as $37,500 each year. Additionally, as an employee, you can contribute up to $19,500 per year. This comes to a grand total of $57,000 in contributions per year for your business. 
  • Loans When Needed. Letting your retirement fund mature as much as possible is always the best policy. However, in some rare situations (such as a pandemic), you may be struggling to make ends meet. In these unusual situations, you are able to withdrawal money in the form of loans from your Solo 401k account. 

What Should You Look for in a Solo 401k Provider?

With all of the options for Solo 401k providers available, it’s important to find one that will provide you with a good experience. Some general considerations you’ll want to make regarding your Solo 401k provider include:

  • How Much Does the Plan Cost? Some plans will impose extra costs and fees with their service. If possible, you’ll want to select a plan that has minimal or no extra costs so that you can keep as much of your money as possible.
  • Is the Process of Managing the Plan Straightforward?  If you have to spend hours or days learning how to use the plan platform, you’ll be wasting valuable time. Seek out a plan provider that makes it easy to modify and manage your Solo 401k.
  • Is there Help Available If You Need it? When you have questions or concerns, you should be able to reach a customer service representative quickly and easily. Make sure your provider offers quality support to their customers.


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