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The 'Solo K' Retirement Plan

A "Solo K" retirement plan is a flexible and easy way to maximize retirement savings for small, single-owner businesses. This plan adds profit sharing to existing 401(k) plans. Business owners can not only maximize their 401(k) contribution ($13,000 for 2004 if under age 50; $16,000 if over age 50), but can also pay themselves a tax-deductible profit-sharing portion based on net earnings. Solo K plans allow a contribution of up to 20% of modified net profit (net profit minus one-half of the self-employment tax). Under certain circumstances, owners can contribute almost dollar for dollar on their earnings. For example, with a net income of $20,000, a self-employed individual over the age of ...

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