Many small-business clients run their operation as a one-person show. once the business has turned the corner, the owner can focus on setting aside more funds for retirement. and the more he or she can save each year, the merrier the client will be.

Let’s say that Milton Greenbaum, age 45, and his one-man company pays him $125,000 in wages. The maximum deductible amount Milton could contribute to a SEP in 2010 is $31,250 (the lesser of 25 percent of compensation, or $49,000). if he sets up a solo 401(k) plan instead, he can defer $16,500 to the account in addition to keeping the maximum $31,250 employer contribution. that gives Milton a total contribution of $47,750 (below the $49,000 limit). and, since he is the only employee of the company, Milton doesn’t have to worry about making contributions for anybody else.

1. If the business has any other employees, they must be covered under the plan.
2. The owner must deal with the paperwork and cost of running the plan.

• Defined Benefit 401(k)s set to make their debut
• IRS sending compliance questionnaires to 401(k) plan sponsors
• Solo 401(lk) plans – great benefit for the sole proprietor

Launch a solo 401(k) for small-business clients