401k Plans for a One Person Company

I run a graphics design business where I am the only employee as of now. Can I set up a 401k plan for my business that I can contribute to? Will I get the tax advantages that regular employees do with their employer sponsored 401k plans? Chan Chung, Bronx, NY 10467

Yes, you can set up a 401k plan for your one person business just like any other business owner can for the benefit of his employees. There is a specific version of the 401k plan that is designed to help small business owners like you save for their retired life. Until the year 2002, it was not possible for a one person business to have a 401k plan for its own but this is not so anymore.

You will find this plan under different names, for example, the http://smallbusiness401k.com calls it the Small Business 401k for One. Under this plan, you can open a 401k account for your owner only business. Businesses that only have employees who do not qualify for the plan or businesses in which the only employee other than the owner is his/ her spouse can also choose this plan.

These plans offer all the benefits that you would stand to get from a regular employer sponsored plan including the possibility of loans from the account. You can choose from a wide range of investment products for this account so that you can diversify your plan assets adequately. In addition, if at some time in the future you decide to expand, you can easily convert the plan into a multi participant plan as well. The contributions you make into your one person plan are made from pre- tax dollars so you get significant tax advantages from setting up this plan.

About Elliot Earl, Director, Pension Trade Association
Director, Pension Trade Association Founded in 1982, the Pension Trade Association [California Domestic Nonprofit Corporation #C1629080] is dedicated to helping workers save for their retirement through expanded coverage of 401k -type defined contribution pension plans.

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