The Super-simplified 401(k) Plan:
A Good Choice for Today’s Self-employed
By SCOTT SULLIVAN, First Vice President – Wealth Management, Smith Barney
As a small business owner, you should be both interested and concerned about two prevailing trends coming together in the American workplace: the job growth created by small businesses and the responsibility of individuals for their own retirement planning. If you are a business owner, with no employees other than co-owners or spouses, then you may wish to consider establishing a Super-simplified 401(k) plan for your business. That’s right. As a small business owner, you can enjoy the same 401(k) retirement plan benefits currently provided to millions of other Americans.
If saving as much as you can for retirement is a prime concern, a Super-simplified 401(k) may be an appropriate choice for you. With a Super-simplified 401(k) you are permitted to make profit-sharing contributions up to 25% of your compensation for incorporated businesses or 20% for unincorporated businesses, subject to a $ 225,000 compensation cap in 2007. Plus, you may make an additional $ 15,500 salary-deferred contribution, and if you are over age 50, that amount increases to $ 20,500. The combination of profit-sharing and salary-deferral contributions for 2007 may not exceed $ 45,000 ($ 50,000 if you are age 50 or older). For many business owners, a 401(k) allows for larger annual contributions than other retirement plans including SEP IRAs, SIMPLE IRAs, and Keoghs.
The Super-simplified 401(k) plan can make saving for retirement easier. Some fully self-directed plans, for example, may allow for a wide range of investment opportunities including stocks, bonds and mutual funds, provide a loan provision, and allow you to transfer other retirement accounts including Keoghs, SEP IRAs and traditional IRAs (excluding after-tax balances) into your Super-Simplified 401(k) account.
A good place to start is with our complimentary publication, The Super-simplified 401(k) Plan, which contains information helpful for understanding the options a Smith Barney Super-simplified 401(k) can offer you.
Scott Sullivan is a First Vice President – Wealth Management, and Senior Portfolio Manager in the Delray Beach office of Smith Barney. He has been with Smith Barney since 1985. Scott can be reached at (561) 243-2230 or by email at scott.d.sullivan@smithbarney.com.
Smith Barney is the private wealth management unit of Citigroup. It is a leading provider of comprehensive financial planning and advisory services to high net worth investors, institutions, corporations and private businesses, governments and foundations.
Citigroup, Inc., its affiliates, and its employees are not in the business of providing tax or legal advice. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any such taxpayer for the purpose of avoiding tax penalties. Tax-related statements, if any, may have been written in connection with the "promotion or marketing" of the transaction(s) or matters(s) addressed by these materials, to the extent allowed by applicable law. Any such taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor.
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