If your business is essentially a one-person operation, there's an option to help you save more money for retirement: The Solo 401(k) plan.

Ordinarily, traditional defined contribution retirement plans allow annual contributions that are limited to either 25 percent of salary if you're employed by your own S or C corporation or 20 percent of self-employment income if you operate as a sole proprietor or single member LLC. Also, traditional profit sharing plans, Keoghs or SEP plans are subject to a  $51,000 cap in 2013 (up from $50,000 in 2012). 

Tax Year Under Age 50 Over Age 50
2013 limit on elective deferral contributions $17,500
(up from $17,000 in 2012)
$23,000
(up from $22,500 in 2012)
2013 limit on combined elective deferral and employer contributions $51,000
(up from $50,000 in 2012)

$56,500 (up from $55,500 in 2012)

Not bad, but with a Solo 401(k) plan, you can probably make substantially larger contributions that lower your tax bill and generate more tax-deferred earnings for retirement.

A Solo 401(k) is made up of two separate parts. Together, the two parts make the plan advantageous: 

1. Elective deferral contribution - As much as 100 percent of the first $17,500 in 2013 of your salary or self-employment income (up from $17,000 in 2012)  can be put into a Solo 401(k) account. That amount increases to $23,000 if you are 50-years-old or older at year end.

2. Additional employer contribution - Your employer (your company or you personally, if you are self employed) can contribute an additional 25 percent of your salary or 20 percent of your self-employment income.

The sum of the two parts is capped at 100 percent of your annual employee compensation or self-employment income, or $51,000 (up from $50,000 in 2012), whichever is smaller. However, the dollar cap is increased to $56,500 for people age 50 or older ($55,500 in 2012).

A Solo 401(k) doesn't force you to contribute more than you can comfortably afford: The plan lets you rack up major tax savings in good years, by making maximum contributions, but gives you the option of contributing less -- or even nothing -- in lean years when you need to conserve cash.

Plus, you generally get the benefits of traditional 401(k) plans, such as the ability to borrow from your account.

Establishing and operating any 401(k) plan means some up-front paperwork and ongoing administrative effort. With a Solo 401(k), however, the administrative work is simplified because you are usually the only participant. If you have employees, you may also have to contribute to their accounts in the same way as a regular 401(k) plan.

Ask your tax adviser to sort out the complexities of various retirement plans and determine whether a Solo 401(k) is right for you.

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