2012 Solo 401k contribution limit is $50,000 ($55,500 if age 50+ due to a "catch-up" provision).
Tax free loans are permitted with a Solo 401k plan. Loans are permitted up to 1/2 of the total value of the Solo 401k up to a maximum of $50,000.
Roth 401k - There is an option to make Roth 401k contributions with the salary deferral portion of the Solo 401k. Contributions into a Solo Roth
401k are not tax deductible, but withdrawals are tax free after age 59 ½.
Potentially greater administrative responsibilities and administrative fees compared to a SEP IRA.
The term Solo 401k is commonly used to refer to the Individual 401k (also known as a Self Employed 401k, Personal 401k, Uni-k and Single k).
The SEP IRA and Solo 401k are popular because both plans have high contribution limits and have completely discretionary annual funding
requirements. In 2012 a SEP IRA has a maximum contribution limit of $50,000 and a Solo 401k has a contribution limit of $50,000 ($55,500 if age
A SEP IRA is easier to setup and has less administrative costs than a Solo 401k, however a Solo 401k may allow a greater contribution at the
same income level due to the way the contribution is calculated.
After tax Roth contributions can be made into a Solo 401k. Roth 401k contributions are not tax deductible, but are received tax free when withdrawn
after age 59 ½. SEP IRA contributions can only be made pre-tax and does not have a Roth option.
Another important distinction between these self employed retirement plans is a Solo 401k has a loan provision. IRS rules do not allow loans with a
SEP IRA. Solo 401k loans are permitted up to 50% of the total 401k value with a $50,000 maximum.
|Individual (SOLO) 401k