CAPITAL IDEAS

Let President Bush, congress and the AARP wrangle about Social Security--you take care of yourself. For anyone who is self-employed, even if it's just a little side business, that can mean setting up a one-person 401(k) account. These plans are sweet, and got sweeter recently, when a few big players, including Charles Schwab and T. Rowe Price, started offering them. Here's why they're great, and how to use them:

Stash big bucks. These plans let entrepreneurs shelter more tax-deferred money at lower salaries than the more popular SEP-IRAs (Simplified Employee Pension-Individual Retirement Accounts). That's because both plans let you contribute 20 percent of your bottom-line self-employed earnings; the 401(k) lets you add another $14,000 (plus $4,000 more in catch-up contributions if you're over 50). So, a 50-year-old earning $30,000 in a side business can set aside $5,576 in a SEP, or $23,576 in a 401(k).

Then borrow them back. The 401(k) is the only plan that allows self-employed workers to borrow from their own retirement fund. That can be handy if you need extra money for the business but would rather pay interest to yourself than the bank. Choose your provider carefully, though, because most of the big low-cost players, including Fidelity, Schwab and Price, don't let you borrow. To do that, you have to set up your account through a third-party administrator, like Decimal Inc. (single-k.com), a San Francisco firm that will let you borrow up to 50 percent of your 401(k) holdings and pay your own account back at prime plus 2 percentage points. But it'll cost you: Decimal charges a set-up fee plus $340 a year for folks using the loan provisions.

Prepare to do paperwork. The downside of the one-person 401(k) is the dreaded 5500 form, which must be filed annually and can be off-putting. Some plan providers will do it for you. Find a list of them at 401khelpcenter.com. There's a one-person 401(k) savings calculator there, too, so you can punch in some numbers and imagine how rich you'll be once you start feeding your new account.

CAPITAL IDEAS | News