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If you're a player or sports fan, you understand the importance of 'extra' effort. When it comes to your financial lives, that little extra could help you grow your savings exponentially. The good news is that the IRS has announced new Solo 401k contribution limits for 2017, allowing you to save extra for retirement.

What are the new Solo 401k contribution limits?

In its latest retirement contribution limits' revision, the IRS has allowed small business owners and self-employed professionals save more for retirement.

New Solo 401k contribution limits for 2017: $54,000 ($60,000 with catch-up contributions for individuals above 50 years); up from $53,000 for 2016.

• Employee Deferral limits: There is no change in the annual employee deferral contributions, staying at $18,000 for 2017, excluding catch-up contributions of $6,000.
• Profit sharing contribution: 20 to 25% of business income.

How does an extra $1,000 make a difference?

Example 1: Joe contributed $1,000 monthly to his retirement account, starting at age 30 until retirement. With an annual interest rate of 5%, compounded annually, Joe retired with a nest egg of $818,698.

Example 2: Michael contributed $1,083 monthly to his retirement account, starting at age 30 until retirement. With the same interest rate and compounding frequency as that of Joe, Michael ended up with $886,650 at retirement.

An extra $1,000 per year helped Michael exceed Joe's retirement savings by $67,952.

Four Reasons to start a Solo 401k plan in 2017

1. Higher contribution limits: A Solo 401k plan allows you to save up to $60,000 in a financial year, making it one of the quickest ways to accumulate retirement savings.
2. Roth savings option: Unlike a traditional Roth IRAs, a Roth Solo 401k plan allows an individual with higher income to save after-tax dollars for retirement. Imagine the returns your investment could gain when invested through a tax-deferred or tax-free vehicle.
3. Alternative investment options: When compared with a traditional retirement plan, a self-directed Solo 401k offers an opportunity to invest in alternative investments. You can invest in real estate, mortgage notes, tax liens, tax deeds, precious metals, private equity, and even personal lending along with the traditional share and bond investments.
4. Participant loan option: A self-directed Solo 401k allows you to borrow up to $50,000 or 50% of your account balance, whichever is less, as a participant loan. This is a crucial feature for small business owners or self-employed professionals that may not qualify for traditional loans.

If you're planning to kick start your retirement savings, a self-directed Solo 401k might just be the right option for you. Seek professional advice when in doubt.

Understanding the No Money down USDA Mortgage

Buying a home in Wisconsin with no down payment is still a reality thanks to the USDA program.  The Rural Development section of the United States Department of Agriculture (USDA) has made great strides in the past two years to educate loan officers and potential borrowers of the benefits of this program.  The mortgage offered by the USDA is quite different from other programs and is a great way for people to purchase a home without a costly down payment.

Mortgage Insurance

Unlike conventional loans and FHA loans, the USDA loan does not require any mortgage insurance.  This means that every dollar of every payment is going towards the principal, the interest or the escrow for the home.

Closing Costs Paid by Seller

A conventional loan allows the seller to pay closing costs up to 3% of the purchase price.  Similarly, FHA will allow the seller to pay closing costs up to 6% of the purchase price.  However, USDA has no limit on the amount that can be paid by the seller.  This means it is possible to find a house and purchase it without paying a down payment or any closing costs.

Property Location

In order to be considered for the USDA loan a home must be located in an area designated as rural by the USDA.  However, would it surprise you to learn that of the 72 counties listed in Wisconsin, 50 of those counties are considered rural?  And the remaining 22 counties have sections that are considered rural. This means that there are numerous homes that could be eligible for this type of loan.

Income Limits

There are also some limits on the person’s income.  The USDA bases the limits on the total number of people that will occupy a home.  For example, a family made up of a mom, dad, and three children under the age of 18 will be allowed more income than just a married couple.  A Wisconsin loan officer can look up the limits for each county and let you know if you meet the guidelines.

Loan Limits

The maximum amount allowed for a USDA loan is different for each county in Wisconsin.  However, the limits are very liberal.  Some counties, such as Ozaukee and Dane, will allow qualifying borrowers to get a loan up to $230,000.

Not For Select Buyers

Some people are under the impression that the USDA loan is only for Wisconsin borrowers looking for their first home.  However, nothing could be further from the truth.  People buying their first home or their fifth home can use the USDA loan.  The only stipulation is that the property must be the borrower’s primary residence.

It has been mentioned in the news a lot in the past three years that mortgage rates are at an all-time low.  When rates are so low it is only a matter of time before they start to rise.  Take the opportunity to talk to a Wisconsin loan officer and find out if you can get a home using the USDA loan.

This communication is provided to you for informational purposes only and should not be relied upon by you. Rock Realty is not a mortgage lender and so you should contact a USDA lender directly to learn more about its mortgage products and your eligibility for such products.

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