Is It Right For You?

You're the proud owner of a small business. It's pretty much a one-person show, although maybe you employ your spouse. Because it's just you, you really don't have the time to spend on complex plan administration. You do, however, like the idea of deciding how and where your contributions are invested.

Your income tends to fluctuate from year to year, so you also want a plan that lets you vary your annual contributions—more when times are good, less when times are lean.

The Tax Benefits of an Individual 401(k)

Contributions to your Individual 401(k) are tax-deductible and may grow tax-deferred. On top of that, you may also make an elective, pre-tax salary deferral to help you amass your retirement savings even faster compared to other plans, such as a SEP-IRA or Profit Sharing plan.

Additional Advantages

• You may make high contributions. In addition to funding your plan with annual employer profit-sharing contributions (up to 20% of your self-employment income), you may also make a salary deferral of up to $15,500 for tax year 2009 for a total contribution of $49,000 for tax year 2009.
• There's a catch-up provision. If you're 50 or over, you can make an additional salary deferral contribution of $54,000 for tax year 2009.
• It's easy to maintain. The amount you contribute to your Individual 401(k) can vary from year to year. You don't even have to contribute every year.

Your Next Step

Contact a Key Investment Team advisor to help determine if an Individual 401(k) is right for you. Be sure to establish your plan by December 31 (or the end of your fiscal year). You'll want to fund your profit-sharing contributions by your tax-filing deadline (generally April 15), including any extensions. And, in general, you must make your salary deferrals by the end of your business tax year.

Key Investment Team does not provide tax advice. The structuring of a retirement plan can have significant tax consequences on you and your business. Investors should consult with their tax professional to determine the tax implications of this retirement plan structure.