If you're looking to maximize your contributions to a deductible retirement account, one thing is for sure! Few choices are looking as good as the Solo 401K these days.

If you are self-employed, solo IRAs and 401Ks will allow you to save for your retirement and take advantage of numerous tax breaks while you continue to work. A Roth IRA is another good option. People do tend to get a little hot under the collar when thinking about what to do when it comes to retirement, but choosing the right type of account for your personal situation is not as difficult as you might think. It's simple, and hopefully, this will take a little of the edge off for you.

The tax laws regarding solo IRAs are relatively simple. Anyone can open an account. Contributions are tax deductible, but after you retire, you will pay income taxes on all disbursements. It doesn't get any more simple than that, does it?

The advantage has always been that it is assumed that your regular income will be lower after you retire, so you can better afford to pay the taxes at that time. Sometimes, though, depending on the type of business you are in, your self-employment income may stay the same. For example, if you are paid residuals from insurance sales or royalties from a book deal, those things will also count as income, even though you are no longer working.

That's why many people turn to the Roth, rather than traditional solo IRAs. Contributions to a Roth are taxed as regular income, but when you take the money out, no taxes are paid. You've already paid them once, so no matter what kind of profits you made through investing within the Roth, the money is never taxed again.

No taxes are paid on interest earned in either type of account. No capital gains taxes are paid if you successfully complete a real estate transaction within them. Those are just some of the tax advantages of solo IRAs and Roth accounts over using other funds.

Solo IRAs are usually referred to as SEP IRAs. Most any broker can handle them, unless you want a self-directed account and hope to make less traditional investments, such as deals involving real estate. For example, if you wanted to buy an apartment building, you can hold it in a self-directed IRA, as long as the brokerage allows that type of investment.

Solo IRAs are available to any business owner or self employed person. A solo 401K, however, requires that your company has one or more employees, other than yourself and your spouse. Contracted labor doesn't count. It has to be an employee that gets a W-2 form from your company every year.

The maximum allowable contributions can change with each tax year. Your accountant should advise you about your limits for the following tax year. Doing your own taxes is not really a good idea, especially if you are self-employed. You'll save money in the long run by hiring a good accountant, familiar with the changing tax laws.

Solo IRAs and 401ks have the highest allowable contribution limits, currently around $100,000 per year, per couple. A Roth maxes out at $10,000 per couple in 2008. Some people have both, so that they can take advantage of the benefits allowed by each, but there are maximums that apply to all of your combined accounts.

Many individuals are looking to fully diversify their investments, since the stock market is not doing so well right now, particularly those who that are approaching retirement age. The story is the same across the board...every one needs to grow their funds as quickly as possible. Using solo IRAs to conduct profitable real estate deals is a fairly untapped market. But, if you make the right deals, it can work out extremely well for you. Just be sure to get some professional advice, along the way.

Joe Fazchas is owner and founder of www.iLOCAdvantage.com, a company that partners with private individuals and lending corporations nationwide for the sole purpose of financing and/or rehabbing investment properties. All of which is done using a proven "turn-key" Real Estate system...The ILOC IRA.

The ILOC IRA was created in 2004 by national Real Estate speaker, author, and investor, Adam King. To learn more on how you can obtain among the highest rates of return on your IRA, 401(K), CD, or other source of private money, simply click and visit: http://www.iLOCAdvantage.com


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