Individual & Roth Individual 401(k) Plans
Retirement investing for the self-employed
- For self-employed workers and their spouses to maximize retirement savings
- Generous contribution limits and simple administration
- Tax-deferred growth potential
- Choose a Traditional Individual 401(k), a Roth 401(k), or both
- Use the Small Business Selector to find a plan
(under age 50)
Up to $55,000/year in 2018 ($56,000 in 2019) annual contributions, or 100% of compensation, whichever is less
(age 50 or over)
Up to $61,000/year in 2018 ($62,000 in 2019) annual contributions, or 100% of compensation, whichever is less
Available for self-employed individuals with no additional employees other than a spouse, deadline to establish account is December 31
Ability to borrow against retirement assets
Loans are available from an Individual or Roth Individual 401(k) account
Minimal administrative requirements
IRS Form 5500 filing is generally not required until the account value reaches $250,000
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What types of contributions are allowed in an Individual 401(k) and how are they allocated?
- Individual 401(k) allows for both, salary deferral and profit sharing contributions
- Salary deferrals can be split between the pre-tax Individual 401(k) account and the after-tax Roth Individual 401(k) account
- Discretionary profit sharing contributions must be made to the pre-tax Individual 401(k) account
Can an Individual or Roth Individual 401(k) be established for a part-time business if a business owner has a 401(k) with a full-time employer?
Yes. However, total contributions between both plans cannot exceed the 401(k) contribution limits ($55,000 or $61,000 if age 50 or older in 2018; $56,000 or $62,000 if age 50 or older in 2019).
What happens if a business owner hires employees?
If employees are hired, generally, they would have to be included in the plan, which will add more complex plan administration rules, expenses, and may cause the need to terminate the Individual 401(k) plan. A business owner may want to consider other retirement plans if planning on hiring employees in the future. Consider using the Small Business Plan Selector Tool to see other options.
Can an Individual 401(k) be opened if a partnership consists of only self-employed partners?
Yes. Generally, each self-employed partner will be able to open a separate Individual 401(k) plan.
Does IRS Form 5500 need to be filed for an Individual 401(k)?
Business owners are generally exempt from filing IRS Form 5500 if the Individual 401(k) plan has less than $250,000 in assets at the end of the year. Plans with $250,000 or more in assets at the end of the year are generally required to file Form 5500.
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