Solo 401(k)s Pack a Retirement Punch

If you're self-employed, a solo 401(k) plan is one of many options for building retirement savings with pre-tax money.

In addition to a regular IRA, you're likely eligible to open a SEP (Simplified Employee Pension) or SIMPLE (Savings Incentive Match Plan) IRA. For many self-employed individuals, though, the solo 401(k) is a better choice due to generous contribution limits that allow you to sock away a lot of cash for retirement and save on taxes.

If you hold an employer-sponsored 401(k) account, you can make pre-tax, salary-deferral contributions of up to $16,500 in 2009, plus an extra $5,500 if you are 50 or older. With a solo 401(k), however, you can save up to $49,000 this year ($54,500 if you're 50 or older). If your spouse has income from the business, you can double that contribution, to $98,000, or more than $100,000 if you're eligible for catch-up contributions. ...