The Benefits of a Solo 401(k): The Most Powerful Tool For Those Who Qualify

For entrepreneurs, freelancers, and self-employed individuals, it can sometimes feel like your retirement account options are limited. Traditional 401(k)s and IRAs might not provide enough flexibility or contribution limits to build the kind of retirement fund you’re aiming for. Enter the Solo 401(k), a powerful retirement savings option tailored specifically for those who work for themselves or run a small business with no full-time employees (other than a spouse).

At Rocket Dollar, we make setting up a Solo 401(k) straightforward and accessible, so you can focus on what matters: growing your investments and securing your future.

What is a Solo 401(k)?

A Solo 401(k), also known as an individual 401(k), is a retirement plan designed for self-employed individuals or small business owners without employees. The plan gives you the dual role of employee and employer, which allows for higher contribution limits compared to traditional IRAs.

The key benefit of a Solo 401(k) is the ability to contribute both as the “employee” and the “employer,” offering greater tax advantages and the potential for faster growth in your retirement savings.

Benefits of the Solo 401(k)

1. High Contribution Limits

One of the biggest draws of the Solo 401(k) is its high contribution limit. In 2024, you can contribute up to $23,000 as an employee (or $30,500 if you’re over 50) and an additional 25% of your business’s income as the employer, up to a combined total of $66,000 ($73,500 if you’re over 50). These generous limits make the Solo 401(k) one of the most powerful tools for self-employed individuals looking to build significant wealth.

2. Tax-Deferred or Roth Option

Like traditional 401(k)s, a Solo 401(k) allows you to choose between tax-deferred contributions (traditional) or after-tax contributions (Roth). With the tax-deferred option, you reduce your taxable income today, deferring taxes until you withdraw in retirement. The Roth option lets you pay taxes upfront, and your contributions and earnings grow tax-free, with no taxes due when you withdraw in retirement.

3. Flexible Investment Options

The Rocket Dollar Solo 401(k) gives you access to a wide range of investment opportunities. You’re not limited to just stocks and bonds—you can invest in real estate, private equity, crypto, and other alternative assets. This flexibility allows you to build a more diversified and tailored portfolio, helping you reach your retirement goals faster.

4. Loan Provisions

Unlike traditional IRAs, the Solo 401(k) allows you to borrow up to $50,000 or 50% of your account balance (whichever is less) from your plan. This can be a game-changer if you ever need quick access to capital for business or personal use, all without triggering taxes or penalties, as long as it’s repaid within five years.

5. No Custodian Required

With Rocket Dollar’s Solo 401(k), you can act as your own trustee. This allows you to take complete control over your investments without needing a custodian to approve every transaction. The ability to make quick, independent investment decisions can be crucial for those involved in fast-moving markets like real estate or private equity.

Who is the Solo 401(k) Good For?

The Solo 401(k) is ideal for:

• Self-Employed Individuals and Entrepreneurs: Whether you’re a freelancer, consultant, or run your own business, the Solo 401(k) offers unmatched flexibility and high contribution limits.
• Small Business Owners with No Full-Time Employees: If you run a small business with no full-time employees, the Solo 401(k) is tailored specifically for you.
• Those Looking for More Investment Options: If you want to invest in alternative assets like real estate, private equity, or cryptocurrencies, the Solo 401(k) gives you that flexibility.
• High-Income Earners: The high contribution limits make this an excellent choice for those looking to shelter a significant portion of their income from taxes or take advantage of tax-free growth with the Roth option.

How Easy is It to Set Up a Solo 401(k) at Rocket Dollar?

Setting up a Solo 401(k) with Rocket Dollar is simpler than ever:

1. Sign-Up Online: Rocket Dollar’s streamlined online platform makes it easy to open and set up your Solo 401(k) in just a few minutes.
2. Fund Your Account: You can fund your account via a rollover or contribution, which is made easy with our transfer module built directly into your account dashboard.
3. Start Investing: Once your Solo 401(k) is set up, you’re free to invest in traditional or alternative assets right away. With no custodian approval needed, you have the freedom to make investments quickly and efficiently.
4. 24/7 Access: Monitor and manage your retirement account any time through Rocket Dollar’s online dashboard, giving you complete transparency and control.