When it comes to planning for retirement, one of the most popular options available to self-employed individuals is the Solo 401k. Through this plan, business owners without employees, or those with a spouse as the only employee, can contribute to their retirement savings at a much higher rate than with other retirement accounts.
If you have decided to open a Solo 401k account with Fidelity, then it is important that you understand the adoption agreement that comes with it. This document outlines the terms and conditions of your account and serves as a legally binding contract between you and Fidelity.
The adoption agreement includes important details about the types of contributions you can make, the investment options available to you, and the rules governing the distribution of funds. You will also find information about any fees associated with the account and how they are charged.
One of the key benefits of a Solo 401k plan is the ability to make both employer and employee contributions. As the business owner, you can make contributions up to 25% of compensation, or up to $58,000, whichever is less, for the year 2021. As the employee, you can contribute up to $19,500, or up to $26,000 if you are 50 or older.
The adoption agreement will spell out the details of these contributions, including any limitations that may apply. For example, your employer contributions may be subject to certain conditions, such as vesting schedules or a minimum length of service requirement for employees.
Another important aspect of the adoption agreement is the investment options available to you. Fidelity offers a wide range of investment choices, including mutual funds, exchange-traded funds (ETFs), stocks, and bonds. You may choose to invest in a single fund or create a diversified portfolio based on your risk tolerance and investment goals.
It is also important to understand the rules surrounding the distribution of funds from your Solo 401k account. You may begin taking distributions as early as age 59 ½, and must begin taking required minimum distributions (RMDs) by age 72. The adoption agreement will provide details about how these distributions are calculated and any penalties that may apply for early withdrawals.
Finally, the adoption agreement will outline any fees associated with your account. These may include annual maintenance fees, transaction fees, or fees for specific investment products. You should carefully review these fees before opening your Solo 401k account to ensure that you understand the costs associated with maintaining the account.
In summary, the Fidelity Solo 401k adoption agreement is an important document that outlines the terms and conditions of your retirement account. By understanding the contributions, investments, distributions, and fees associated with your account, you can make informed decisions about your retirement savings and plan for a secure financial future.
