The person 401(k) – also referred to as the solo 401(k), the solo k, or uni-k – functions a lot exactly the same as conventional 401(k) plans provided by big businesses, also as SEP IRAs developed for the self-employed.
In contrast to other retirement plans, although, a person 401(k) is strictly for sole proprietors who've no workers (even though your spouse might contribute if she or he earns earnings out of your company).
The person 401(k) comes in each a conventional and Roth version, just like IRAs. Using the conventional person 401(k), you place away cash on a pretax basis and it grows tax-deferred. Your cash is taxed whenever you withdraw it, inside a future that might nicely consist of greater tax prices.
In the event you go for the Roth version, you place in after-tax dollars as well as your cash grows tax-free – which indicates it isn't taxed upon withdrawal. You are able to split your contributions in between the two kinds of accounts. 1 other point: In contrast to SEP IRAs, solo 401(k)s permit you to borrow against your savings.