SOLO(K) NEW INVESTMENT FOR FIRM OWNERS.

Byline: Evan Pondel Staff Writer

Self-employed workers long saddled with limited savings options are being wooed by banks touting new ``solo(k) plans'' to compete with traditional 401(k) accounts. But financial advisers caution they are not for everyone.

As the retirement plan garners more popularity since its inception in 2001, the banking industry is attempting to enlist its own customers. Bank of the West recently introduced its individual (k) retirement plan for small businesses, offering the product at nearly 300 of the institution's branches.

``We have found that a lot of small businesses have been salivating all summer for this plan,'' said Bob Bannon, president of Eureka Investment Advisors, a Bank of the West subsidiary. ``It's a pretty nice deal, most notably the contributions that you can make.''

The fundamental difference between the solo(k) plan and a traditional 401(k) is the amount business owners can contribute. Those who are self-employed can dump as much as $40,000 annually into the plan. Under the more traditional 401(k) plan, employees can contribute $12,000 in 2003, and another $2,000 in catch-up contributions if the participant is over 50.

``The product is good for the right self-employed person,'' said Jean McCleery, a certified financial planner with American Express Financial Advisors Inc. in Oxnard. ``You have to make sure you have decent cash flow before signing up for this type of plan. And if you're self-employed, that can be difficult at times.''

McCleery said unlike SEPs, or simplified employee pensions, those who sign up for a solo(k) plan usually determine how much they are going to contribute at the beginning of the year. ``So unless you have consistent cash flow, a solo(k)'' may not be as appealing as an SEP. Though there are different administrative expenses, SEP contributions can be determined at the end of the year.

But there are several other benefits to solo(k) plans. For example, federal law allows participants to take loans from the solo(k) and pre-existing plans can be rolled or transferred into the plan. Business owners can also contribute as much or as little as they want on an annual basis within maximum limits, according to Bank of the West.

Among other benefits, employees of larger firms who have outside businesses can set up a solo 401(k) to bolster their total retirement contributions. And freelance writers or members of boards of directors, can save through their 401(k) at their main job and still invest as much as 25 percent of their sideline earnings in the solo 401(k), as long as the combined total doesn't exceed the $40,000 limit, Bannon said.

Rick Meigs, president of Portland, Ore.-based 401khelpcenter.com, takes a more simplified approach to the solo(k) plan.

``There really nothing that unique about it. People are just able to contribute significantly more to the plan. And because of that they've been hot for the last 18 months,'' he said. ``Obviously, another big advantage is that you can borrow from the plan.''

Yet the solo(k) plan target audience might skew a little older than other retirement plans. That's because 20-and 30-year-olds might not have enough disposable income to fully take advantage of solo(k) contribution levels, Meigs said.

``But I suppose it really depends on what you're able to afford in the end,'' he said.

There are several companies that offer solo(k) plans, most of which are listed at 401khelpcenter.com. The plans are often listed under different names such as single-participant 401(k) and one-person 401(k).

Evan Pondel, [phone]

evan.pondel(at)dailynews.com