According to USDA, only 40% of farm households participate in some type of retirement account. For self-employed farmers and ranchers without full-time employees, the opportunity to invest in a One-Participant 401(k) plan is a way to (1) save money for retirement, (2) reduce taxable income, and (3) provide the potential option to borrow from the plan.

The One-Participant 401(k)is a qualified retirement plan designed specifically for business owners with no full-time employees other than the business owners and their spouses. Visit with your financial planner and tax advisor if you have part-time employees and are considering establishing a 401(k) for your business to make sure you comply with 401(k) funding rules.

One-Participant 401(k)s are also called Solo 401(k)s, Self Employed 401(k), Individual 401(k), One-Participant 401(k), Solo (k), Uni-k, or One-participant k.

The plan gives self-employed individuals and their spouse an incentive to save for retirement by allowing them to contribute to a 401(k) plan and not pay federal or state income taxes on the contributions until the funds are withdrawn. Or should circumstances or accounting keep their taxable incomes low, they have an opportunity to shelter substantially more money into a Roth One-Participant 401(k) than a Roth IRA. Speak to your advisors about rolling other retirement accounts into a Roth One-Participant 401(k).

Continue this article on the Center for Agricultural Profitability site.

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