Solo 401K Plan

Solo 401K Plan

If you are one of the many small business owners who own a Solo 401K (Self-Employed 401K, Uni-K, Individual 401K, or One-Participant 401K), then you might be curious about just how wise it would be for you to add gold to your portfolio. If so, then you have landed on the right page. When you add precious metals bullion to your portfolio you are exercising an excellent method for diversifying it and providing yourself with a hedge against currency devaluation and economic troubles.

this page will show you what exactly a Solo 401K is and how it matches up with other tax-advantaged retirement vehicles. It will reveal the benefits to adding gold onto your portfolio and how you can get started if you believe this is a good idea for you.

What is a Solo 401K Plan

As stated on the IRS website, the Solo 401K isn’t a different kind of 401K plan as far as functionality is concerned. Rather, it is a retirement plan that enables business owners, along with their spouses, who have no other employees, to be able to still partake in one of these tax-deferred 401K plans. It was introduced originally in 2001 as part of our Economic Growth & Tax Relief Reconciliation Act. They were the first ever employer-sponsored retirement vehicles to be specifically aimed at self-employed workers. Those workers had been relegated previously to having to use Profit Sharing Plans, IRAs, or Keogh Plans.

A Solo 401K plan has nearly all the same rules and requirements as a traditional 401K. There are 2 notable exceptions between them which are –

1. The owner/Employer and the business will not be subject to any of the costly and complex guidelines set down by the ERISA (Employee Retirement Income Security Act).
2.  The business can have no other employees who are considered to be ‘full-time’, which is 1,000 hours plus per year.

Solo 401Ks are not required to utilize special custodians like traditional IRAs. That means any financial institution or bank may act as the trustee. If the owner of the Solo 401K can find an institution that allows it, their plan can invest in a whole range of alternative asset classes like precious metals or real estate. There are some circumstances under which a Solo 401K plan can even invest into life insurance. Even a self-directed IRA plan can’t do that.

Properly used, a Solo 401K is nearly unmatched in its ability to offer a solid retirement plan with high flexibility, low fees, easy transaction, and high contribution limits. You can find only 2 major drawbacks concerning these plans –

1. They are not made available for most workers.
2. They require a huge amount of paperwork as well as document maintenance when compared to other plans.

Physical Gold or Paper Gold?

Paper Gold stocks are simply shares from companies that explore, produce, and mine for gold. You can literally find hundreds of gold stocks to invest in like these, from large companies like GDX (Gold Miners Index) or HUI (BUGS Index).

Plan Type Sponsorship 2015 Contribution Limit Roth Option? Allow Gold Stocks? Allow Gold ETFs? Allow Gold Bullion
401(k) Private Employer $18,000 / $24,000 Yes Maybe Maybe No
Solo 401(k) Self-employed $18,000 / $24,000 Yes Yes Yes Yes
Keogh Plan Self-employed or Unincorporated Employer $53,000 No Maybe Maybe No
403(b) Government or Non-profit Employer $18,000 / $24,000 Yes Maybe Maybe No
457(b) Government or Tax-exempt Employer $18,000 / $24,000 Yes Maybe Maybe No
Simple IRA Private Employer $12,500 / $15,000 Yes Yes Yes Maybe
SEP IRA Business Owners & Self-employed $53,000 Yes Yes Yes Maybe
Profit Sharing Plan Private Employer $53,000 No Maybe No No
Money Purchase Plan Private Employer $53,000 No Maybe Maybe No
Annuity Individual None No Maybe Maybe No
ESOP Private Employer Varies Yes Maybe No No
SARSEP Private Employer $53,000 No Yes Yes Maybe
Self Directed IRA Individual $5,500 / $6,500 Yes Yes Yes Yes
Traditional IRA Individual $5,500 / $6,500 Yes Yes Yes No
Precious Metals IRA Individual $5,500 / $6,500 Yes Yes Yes Yes
Thrift Savings Plan (TSP) Government or Military $53,000 No No No No

Dealing with Gold stocks can be a bit more risky than just owning physical gold. The reason is that historically these gold stocks appreciate much faster as the spot prices of gold rise. If gold prices fall, these gold stocks tend to fall faster as well.

There are more risks involved with Gold stocks such as –

1. Cost of Production Risks – This involves the depreciation of mining equipment, labor costs, and increases in property values. All of these can have a very negative impact on mining companies.
2. Regulatory Risks – Companies that explore and mine for gold are always subject to increases in taxes and regulations.
3. Fiat Currency Risks – Selling securities such as shares from a gold mutual fund or gold stocks, means being paid in fiat currency. If there should be a currency collapse then all you will be left holding is worthless paper.
4. Management Risks – Companies that are over-leveraged and poorly managed will and do file for bankruptcy, or they close up shop altogether.

Dedicating 5 to 20 Percent to Precious Metals Carries Good Benefits

Investing in Gold can be a safe and simple way of diversifying your retirement portfolio. Investing in precious metals like gold, palladium, platinum, and silver, help give our assets protection against inflation and market volatility.

Gold is does more than just make a great hedge, it gives the owner lots of growth potential. There are actually many investors who will buy gold specifically for the growth prospects alone. Most analysts today are predicting that gold will continue to see value increases on into the future.

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