What Is Fidelity Solo 401k? Step By Step Guidelines For Set-Up

Fidelity Solo 401k: If you are an independent contractor and have no one else working for you or above you then you can make a Solo 401K account. It is a retirement account available to solo contractors. Working as a solo, what all taxes you have to pay as a self-employed person are contributed to a Solo 401k.

Today, in this article we are going to provide you important details about Solo 401K regarding how it works and how it can be set up, among other crucial information. So, if you are interested to find out about Solo 401K then read the below-given information till the end.

Fidelity Solo 401k

Fidelity Solo 401k Key Highlights

  • Only self-employed individuals or the sole business owner or sole proprietors are eligible for Solo-401k. In addition to that, the spouse of the owner may also take part in the plan.
  • The participants get many investment options such as several mutual funds, bonds, ETFs, stocks, and more.
  • It has been contributed or funded by the compensation deferrals as well as employer contributions.
  • The participants get several tax benefits like Tax-deferred growth, tax-deductible contributions, among a few more.

Solo-401k Overview

A Solo-401k is known by several different names such as self-employed 401k and also individual 401k. It is a kind of very special savings option that is meant for the owners of small-business who usually don’t have any workforces. In that way, it makes these kinds of accounts a great option for the sole proprietors as well as for the independent consultants who are seeking for a retirement plan that is quite comparable or relatable to the one they may possibly receive after working for a large company.

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The self-employed 401k is also compared to the standard 401k because these both work quite similarly in several ways. The contributors or partakers can make their contributions with the help of their pre-tax earnings, after which those savings can be further capitalized in various vehicles for growing the tax-deferred till it is withdrawn at the time of retirement.

On the other hand, the Solo-401k also features one essential difference. Since the partakers act both as employers as well as employees, they can set away more money every year than they may possibly get under a traditional 401k, and IRA, or else through any other small business retirement account.

Due to the extraordinary contribution limits, along with a quite easy plan administration, the Solo-401k or self-employed 401k has become a great and appealing option for business owners who come across the requirements of the plan and are in search of a considerable potential of higher savings.

Fidelity Solo 401k

Self-Employed Retirement Plan Set-Up: Step By Step Guidelines

So, let’s get deeper into the details so that we can set up your Fidelity Solo 401k plan. Below are the step-by-step directions that will come in handy in the process.

Step 1: Employee Identification Number

So, an Employee Identification Number is very important in order to put up money on Solo 401k. So, first thing is to get your Employee Identification Number. Think of your social security number. The Social Security Number of your business is also termed as EIN.

If you want your EIN number then you don’t have to do anything. You just have to apply at the IRS website to get your EIN. If you are thinking that it’ll take a lot of time then you are wrong. It takes very little time and simple steps to get your EIN. You just have to follow the procedure guidelines given on the website to gain your EIN.

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Advisory: As soon as you get your EIN, you should take a print and keep it somewhere safe so that it doesn’t get lost. Although you can get your EIN again but we consider not taking any risk.

Step 2: Filling Your Forms

To set up your Fidelity account, you need to fill two forms that are really simple and can be found on Fidelity’s website. In order to download the forms, click on the “Get Started On Your Own” section of the site. You will get both forms there.

So, the first form is the application of Solo 401k itself. The second form that you’ll be filling in the Adoption Agreement. To have an overview you can view the image below.

While filling these forms, if you have any problem just call Fidelity. They will help you out in filling these forms. The final submission you can do by mailing these forms to Fidelity and can wait for few days to open your account.

Step 3: Make the Contribution

As soon as you have opened your account, you can make contributions or put money on Solo 401k. It is a little complicated that you can’t make the payment directly from your account online. Instead, you have to mail Fidelity a check from your regular bank account. It is annoying but you’ll get used to it.

Step 4: Select or Choose your Investment Options

After you have put up your money into your account, the real task is to put that money into use. There are a lot of offers in your account and might differ on the amount you have in your account. Fidelity has a lot of options and you can put your money on Fidelity Index Funds.

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Step 5: Record the Deduction

Make sure that you are recording your contribution in order to calculate your tax deduction. If you are using software for it then let that software handle it or you can consult a tax professional as well if required.

Solo 401K: How It Works?

In simple words, it is like your small business’s own retirement plan. It is similar to the 401k account you had at work but the difference is that now you are in charge of this account with only one employee working and that’s only you.

Solo 401k has two parts: the employee and the employer part. Just like being at work, you can contribute money to it as an employee. Now, being an employer you can contribute money as well. So, you can put your both side on the line to contribute. It will be easier for you to make the contribution.

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