It goes without saying that self-employment comes with a lot of privileges. However, the individual has to take responsibility for retirement in such cases. It is recommended to save an ample amount of money for the retirement plan, especially in case a person falls into a lower income group. Solo 401k contributes to being the most prominent retirement plan for self-employed individuals. The attributes of the retirement plan in comparison to other traditional retirement plans are inclusive of the contribution limit as it enables an individual to make contributions to employees in addition to the contribution of the employer. Here are some benefits you can reap by investing in 401k retirement plans:
Higher contribution limits
Higher contribution limits contribute to being the most distinguished attribute of 401k retirement plans. In accordance with the recent guidelines, people can invest a plethora of funds based on a number of parameters. People who have attained the age of 50 years can add the catch-up contributions of $5,500. Thus, there will be an extension in the overall contributions.
Loan facilities
It is recognized to be the best feature, owing to which people aim to invest in 401k retirement plans, and which makes it differ from other typical retirement plans. It is possible for the owner of the plan to borrow loan of up to 50% of the entire value of the fund with the least interest rate. The rate of interest does not go to the account of the employer only.
Roth contributions
Another reason why people having higher income prefer 401k retirement plan is owing to its capabilities of making contributions to Roth. Roth contributions are recognized to be after-tax contributions. It enables individuals to withdraw fund without payment of taxes during retirement.
It also offers checkbook control facility, and thus the account holder does not need to run around the IRA custodian for investing. It contributes to being a cost effective retirement solution, owing to which people prefer investing in this plan.