Efficient Management of Your SBO 401k

I run a business where I and my wife are the only employees with the eligibility to participate in a retirement plan. What kind of plan should I choose and how can I manage it efficiently with my time constraints? – Jonathan Lodge, New York

Businesses where the owner and spouse make the only eligible employees for a retirement plan can opt for SBO-401k plans. This is a government registered savings plan that helps you set aside a portion of your earnings for future needs. This plan is tax deferred, which means that the contributions that you make into the plan are not taxed at the time when you make them. At withdrawal time, taxes do apply on the amounts that you take out from the plan. The SBO-401k plan is especially designed for small businesses with limited employees.

Your SBO-401k plan can be self directed, that is, you set up and manage it on your own; or it can be managed by a third party institution. There are several financial institutions that set up and manage 401ks on behalf of small businesses. Your bank may be a good first stop for you, if you want to have your 401k plan professionally managed. Other than banks; mutual funds, insurance companies and others also carry out these 401k related activities.

However, for a business like yours where only you and your spouse are the eligible contributors, it is quite unnecessary for you to opt for professional management. Simply choose an online 401K setup and management service like 401k Easy Online (http://401k-easy-online.com/) and you will find that making, tracking and managing contributions takes just a few minutes on a monthly basis.

Many small business owners are increasingly opting for such deals because of the complete control they get over their 401k plan. Such 401k suites make it easy for you to track your plan right from your desk at office. You can contribute to and manage your plan efficiently despite any time constraints that you may have.

Understanding the Requirements for Solo 401k Plans

I run a small business but it’s not a sole proprietorship. Can I opt for a Solo-401k? – Jeannette Lemos, Delaware

Many small business owners fail to take advantage of the benefits that a Solo 401K plan offers because they are under the misconception that this plan is only for sole proprietorships. The fact is that not just sole proprietorships, but corporations and partnerships can set up and use this plan too. The only criterion is that the business owners should be the only eligible participants to the plan.

There are several financial institutions that offer 401k plans especially designed for small businesses. These plans may be variations of their regular 401ks or special plans created just for this purpose. If you have been searching unsuccessfully for SBO-401ks with banks, mutual funds or insurance companies in your locality, it may just be a simple case of their calling it by a different name. The SBO-401k is also called the Solo 401k, Individual 401k, Uni-K plan or Self employed 401k. Just ask your bank or insurance company to tell you about the 401ks they have for small businesses. A simpler option is to set up the plan yourself and manage it on your own with a DIY 401k package such as the one offered by http://401keasyonline.com/

One important point to remember is that you need not have a business that has only you and your spouse as employees to adopt the SBO-401k. Your business can employ other staff members. But for you to adopt this special 401k for small businesses, these employees should not fulfill the eligibility criteria you choose for your 401k. If they do, then the SBO-401k is not for your business.

This makes it necessary for you pay extra attention when determining the eligibility requirements for the plan. The requirements should be such that you are eligible but your current employees are not. Remember that even if your spouse is an employee of your business and he/ she meets the eligibility criteria, you can still adopt the SBO-401k because, by law, your spouse is treated as an owner of your business.