One-Participant 401k

[gene]

http://www.irs.gov/Retirement-Plans/One-Participant-401%28k%29-Plans

The One-Participant 401K is different from the standard 401k in that it's designed for the small business owner with no employees. The wife/husband can be included if they work for the company, though.

The primary benefits seem to be that you can put in a lot more money than a regular 401k, and you can be your own trustee of the account which is less expensive than the normal employer provided 401ks. You are not required to use a bank or trust company. It is self directed and you can borrow money from it like other 401k plans if those employer plans allow it.

Anyone have any thoughts or experiences with this type of retirement program?

gene

[byhammerandhand]

Yes, I have one through my broker.    I'll be glad to set you up.   I spent about 10 years on my former employer's 401(k) employee advisory committee (world-wide we had about 1500 employees and about 1000 of those in USA).   So setting up a 401(k) was a very early decision I made when I started my business.


I needed to establish a 401(k) "plan document."    It was about as I always expected how one of these got done.   About 80 pages, with most pages reading something like:
- select one of more of the below
- select zero or more of the below
- select exactly one of the below.

Checked them off, sent them in and they sent me a nice spiral bound book.

My wife does not work for the company, other than closing the monthly books and doing income taxes.   (I love you honey!)     But I set her up as co-trustee.

I didn't have the time or inclination to do the asset allocation etc., so my guy invests the money and I pay him a percentage of assets.   

Traditional 401(k)) and employer combined contributions must be lesser of 100% of employee's salary or $51k ($56.5k for age 50 or above).   That's another advantage over an IRA is the cap is much higher.  That's way more than I want or am able to put in a year.    If you have employees, though, there are some regulations as to what you must do with them.   I don't have any and didn't plan any, so I didn't pay much attention to those considerations.

Since initiation, the plan administrator got outsource from the brokerage house to a third party, so there's a $125 / year administrative fee.   I'm not sure what all they do for that money other than run interference with the feds as needed (audits, compliance, etc.)

Comparison of various defined contribution options:
http://en.wikipedia.org/wiki/Comparison_of_401%28k%29_and_IRA_accounts