Solo 401(k) May Benefit Entrepreneurs

RALEIGH, NC, May 26, 2011

As many Americans have lost their jobs during the recent turbulent economic times, some are looking to start their own business as a way of getting back on track. The roadblock facing them is that securing a bank loan has become extremely difficult. W. Landon Watts (www.LandonWatts.com), wealth strategist for Raleigh-based Banyan Rock & Talent, believes that the solo 401(k) may benefit individuals looking for avenues to raise capital. Watts explains below how a solo 401(k) may help an individual start a business, as well as potential drawbacks of utilizing this option.

Self-employed individuals and small business owners who have no other full-time employees other than their spouse are eligible to set up a solo 401(k) plan. In doing so, they have the opportunity to roll an existing 401(k) from a previous employer into the plan. Once the solo 401(k) is funded, The IRS allows an individual to borrow up to $50,000 or 50 percent, whichever is less. Individuals have flexibility to set pay-back terms, ranging from one to five years. The funds remain earmarked for retirement as long as the individual is able to continue making loan payments.

"Borrowing from a solo 401(k) plan is often overlooked as a viable option to raise capital," says Watts. "There are risks and rewards to be evaluated, so thoroughly researching all options is a great first step in determining if the plan is right for you."

Utilizing a loan from a solo 401(k) does not come without risks, though. Unlike other retirement programs, solo 401(k) plans are not subject to ERISA protection. This means that the assets are eligible for seizure by creditors and subject to state law, if the individual or business experience financial difficulty that does not result in bankruptcy. If the business fails, the individual runs the risk of defaulting on the loan. In this instance, they would be obligated to pay taxes on the loan amount, along with early withdrawal penalties. Plus, the loss cuts into the individual's retirement account. Depending on the person's age, there may be less time to recoup these losses.

A solo 401(k) differs from an employer-based 401(k), as it includes a profit-sharing aspect. The details of setting up any retirement plan can be difficult to understand. Watts recommends speaking to a financial professional to help assess what retirement savings and other types of investment plans may be best suited for an individual's needs. He has included additional information about solo 401(k) plans including contribution examples in his newsletter available online at http://www.LandonWatts.com.

About W. Landon Watts:
W. Landon Watts specializes in wealth strategy solutions for individuals, corporations and institutions, focusing on retirement and insurance planning in both the non-profit and for-profit sectors. Watts joined Banyan Rock & Talent in 1997. He currently holds an Investment Company and Variable Contract license, as well s a Life and Health Insurance license. Though not a CPA, Watts and Banyan Rock & Talent wealth strategists work within specific legal parameters to indicate tax-advantage opportunities that clients along with their accountants can utilize. Watts understands everyone has different goals, risk tolerances and objectives; he enjoys customizing each portfolio for his clients. Watts received a Bachelor of Science degree from Appalachian State University in 1993. He is licensed to conduct business in Florida, Indiana, North Carolina, South Carolina and Virginia. For more information, visit http://www.LandonWatts.com or call (919) 782-0033.

About Banyan Rock & Talent:
Based in Raleigh, N.C., Banyan Rock & Talent is a collaboration of registered reps with FSC Securities Corporation. Founded in 1986 on the philosophy that strength, growth and the diversification of their client's hard-earned money is made possible through knowledge, diligence and years of experience, Banyan Rock & Talent specializes in areas including stocks, bonds, mutual funds, variable annuities, retirement strategies, market timers, life insurance, disability insurance and applied real estate. All strategists are registered representatives offering securities through FSC Securities Corporation, a registered broker-dealer, and member of FINRA/SIPC. For further information, visit 3356 Six Forks Road Raleigh, NC 27609, or call (919) 782-0033.

Securities offered through FSC Securities Corporation, Member FINRA/SIPC. Banyan, Rock & Talent is not affiliated with FSC Securities Corporation or registered as a broker/dealer.

Media contact Brian Van Norman and his related contact information is not affiliated with FSC Securities Corporation.

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Media Contact:
Brian Van Norman
919.232.5008
brian@articulon.com