| Account Description |
As a small business owner with no employees, you
may be able to contribute more than with other retirement plans.
An Individual 401(k) may work well if you have income of less than
$176,000 and want to maximize your retirement savings. With an
Individual 401(k) you have the flexibility to change how much your
business contributes from year to year. |
| Eligibility to Contribute |
You can contribute at any age if you are
self-employed or a business partner. |
| Maximum Annual Contribution |
May use a combination of salary deferral and
profit sharing contributions.
2006 tax year:
- Profit Sharing: Up to 25% (20% for self-employed) of compensation or $44,000.
- Salary deferral: Up to 100% of compensation or $15,000
($20,000 if over age 50).
- Combination may not exceed $44,000 or ($49,000 age 50 and
older).
|
| Tax-Deductible Contributions |
As a small business owner, you can deduct your
contributions for yourself, and your business partner from your
company’s federal taxable income.
Beginning in 2006, your plan may allow you to allocate part or all
of your deferral to a Roth 401(k). Roth 401(k) salary deferrals are
not tax deductible but contributions and earnings grow tax deferred
and may be eligible for income tax free withdrawals if held for five
years and attaining age 59 ˝. |
| Taxation of Earnings and Withdrawals |
Tax-deductible contributions and earnings are
taxed as ordinary income when withdrawn. |
| Types of Investments |
Thousands of mutual funds from many well-known
fund families available through FCVA. |
| Minimum Initial Investment |
Varies by account |
| Withdrawal Penalties |
10% IRS early withdrawal penalty if withdrawn
before age 59 ˝ unless exception applies.
Exceptions:
- Normal retirement age
- Death
- Disability
- Substantially equal payments made over life expectancy
- Termination of service after five years and reaching age 55
- Rollover to an IRA
|
| Required Withdrawals |
Must begin at age 70 ˝. |
| Deadline to Set Up and Fund |
Plan must be established by the last day of the
business’ fiscal year.
- Salary deferral portion of the contribution must be deducted
from a paycheck prior to year end.
- Business owner (employer) contribution may be made up
through the business’ tax filing due date plus extensions.
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