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401(k) Fact |
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You’re eligible to make a full catch-up contribution to your 401(k) if you turn 50 at any point during the calendar year. For example, if you turn 50 in November 2011, you can contribute the additional $5,500 catch-up for 2011 in equal installments beginning in January 2011. |
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If you own an incorporated business, and you're the only employee, you may want to investigate the individual 401(k), sometimes called a solo 401(k). Like other 401(k)s, these plans have contribution limits of $16,500 in 2011, plus an additional $5,500 contribution if you are 50 or older.
An individual 401(k) may offer several advantages:
- It is relatively inexpensive to set up and administer.
- It allows rollovers from other qualified plans and tax-deferred traditional individual retirement accounts (IRAs), so you can consolidate your retirement assets and invest them as you see fit.
- With most solo 401(k)s, you can take a loan from your account, which isn't possible with a SEP-IRA or regular IRA.
- Since there aren't other participants, except possibly your spouse or business partner, there are no testing requirements to demonstrate that the plan is being administered fairly.
You can compare the plans that are available by conducting a Web search for individual 401(k) sponsors.
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