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Can I open a Solo 401k now and then add my spouse later?
Opening a solo 401k when you’re self-employed is a great way to save for retirement. But what if you want to open an account now and then have your spouse participate later? The good news is that in most cases, you can add your spouse to your existing solo 401k account down the road.
What is a solo 401k?
A solo 401k, also known as an individual 401k or self-employed 401k, is a retirement savings account designed specifically for self-employed people and small business owners without full-time W-2 employees. It allows the highest contribution amounts for any defined contribution plan available to self-employed individuals.
Can I add my spouse to my solo 401k later?
Yes, you can add your spouse to your existing solo 401k account later on, provided your spouse also works in the business. As long as your spouse is reporting earned self-employment income from the business, your spouse would become eligible to participate.
When can my spouse start contributing?
Your spouse can start contributing to your solo 401k plan as soon as they begin working in your business and earning self-employment income. This makes them eligible for plan participation.
How do I add my spouse to my solo 401k plan?
As long as your spouse is also self-employed in the business and reporting your spouse’s own self-employment income, your spouse can also contribute to the plan (a new account would need to be set up under the name of the plan for the benefit of your spouse and we will draft the paperwork to open such an account).
Your spouse can then make contributions to the plan which means your spouse would need to have a separate holding account (e.g. brokerage account) for holding your spouse’s funds under the plan.
The process involves:
- Notifying your Solo 401k provider that you want to add your spouse as a participant
- Providing your spouse’s information such as name, etc.
- Opening a new 401k account in the name and EIN of the Solo 401k for the benefit of your spouse
- Funding the Solo 401k account by either (i) having your spouse make contributions to their new Solo 401k account and/or (ii) rolling over funds to the Solo 401k account from another retirement account such as a former employer plan and/or Non-Roth IRA.
By taking these steps, you can include your spouse in your solo 401k plan once they start actively working and earning income through your business.
Learn More: Want to learn more about solo 401k plans and how to optimize retirement savings? Click HERE for more information.
