Jul 31

The Solo 401k & the UBIT Rules

One of the advantages of using retirement funds, such as a 401(k), Solo 401K or an IRA to make investments is that in most cases all income and gains from the investment will flow back to the Solo 401K tax-free. This is because a 401(k) is exempt from tax pursuant to Internal Revenue Code 401 and Section 512 of the Internal Revenue Codes exempt most forms of investment income generated by a 401(k) and a Solo 401K from taxation. Some examples of exempt type of income include: interest from loans, dividends, annuities, royalties, most rentals from real estate, and gains/losses from the sale of real estate.

The 401(k) and UBTI rulesHowever, the IRS enacted a set of rules in the 1950s in order to prevent charities and later 401(k) and IRAs from engaging in an active trade or business and, thus, having an unfair advantage because of their tax-exempt status. These rules can be found under Internal Revenue Code Sections 511-514 and have become known as the Unrelated Business Taxable Income rules or UBTI or UBIT. If the UBTI rules are triggered, the income generated from that activities will generally be subject to a 35% tax. Of note, a 401(k) or Solo 401K investing in an active trade or business using a C Corporation will not trigger the UBTI tax.

The UBTI generally applies to the taxable income of “any unrelated trade or business…regularly carried on” by an organization subject to the tax. The regulations separately treat three aspects of the quoted words—“trade or business,” “regularly carried on,” and “unrelated.”

Trade or Business: In defining “unrelated trade or business,” the regulations start with the concept of “trade or business” as used by Internal Revenue Code Section 162, which allows deductions for expenses paid or incurred “in carrying on any trade or business.”

Regularly Carried On: The UBIT only applies to income of an unrelated trade or business that is “regularly carried on” by an organization. Whether a trade or business is regularly carried on is determined in light of the underlying objective to reach activities competitive with taxable businesses. Short-term activities are exempted if comparable commercial activities of private enterprises are usually conducted on a year-round basis.

Before it can be determined whether an activity is seasonal or intermittent, the relevant activity must be identified and quantified, a step that is often troublesome.

Interestingly, unlike an IRA, using nonrecourse financing to purchase real estate will not trigger the UBIT/UBTI tax since it will not be treated as Unrelated Debt Financed Income (exception exists for 401(k) qualified retirement plans but not IRAs under Internal Revenue Code Section 514(c)(9).

The type of income that generally could subject a 401(k) or Solo 401K to UBIT or UBTI is income generated from the following sources:

  • Income from the operations of an active trade or business through a passsthrough entity (i.e. LLC or partnership). For example, a store, restaurant, manufacturing business, real estate development company.
  • Using margin on a stock purchase.

If you have any questions, please contact the tax pros of the IRA Financial Group at 800.472.0646!

Jul 30

Why Choose the IRA Financial Group to Open a Solo 401k?

Excellence: Our in-house retirement tax professionals have worked at some of the largest law firms in the United States, including White & Case LLP and Dewey & LeBoeuf LLP. Their tax and ERISA experience is unmatched in the industry and is the reason we are considered the leading facilitator of true “Checkbook Control” Solo 401K Plan structures.

Work directly with our in-house retirement tax professionals to set-up an IRS compliant Solo 401K Plan. Our clients have direct access to our in-house retirement tax professionals to ensure that the Solo 401K Plan is customized to satisfy the client’s retirement and investment objectives. In fact, we encourage our clients to contact our in-house retirement tax professionals with any tax and ERISA questions concerning the structure or a proposed investment to ensure full IRS compliance.

Open your Solo 401(k) with the IRA Financial GroupOur Solo 401K experts will take care of the entire set-up of your IRS compliant Solo 401k Plan. Our Solo 401k Plan experts and tax and ERISA professionals are on site greatly reducing the set-up time and cost. You will find that our fee for this service is significantly less than other companies that perform the same or similar services.

Leader: IRA Financial Group is the markets leading provider of Solo 401(k) Plans. We have helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investments.

Value: We strive to offer our clients customized Solo 401(k) Plans at a fair and reasonable price. Whereas our competitors are forced to outsource much or all of their tax work and consultation, each client of the IRA Financial Group is assigned to one of our in-house retirement tax professionals allowing us to offer customized Solo 401(k) Plans for significantly less than our competitors.

We provide the following all for one low price:

  • Free tax consultation with our in-house tax and ERISA professionals
  • Adoption Agreement
  • Basic Plan Document
  • EGTRRA Amendment
  • Summary Plan Description
  • Trust Agreement
  • Appointment of Trustee
  • Beneficiary Designation
  • Loan Procedure
  • Loan Promissory Note
  • Free tax updates
  • Free tax and ERISA support
  • Satisfaction Guaranteed!

Integrity: We are guided by the rules of ethical conduct in all that we do. Our relationships with clients are built on trust, respect, and confidentiality.

Innovate: We anticipate the changing tax and financial needs of our clients and creatively adapt our Solo 401(k) Plan tax solutions to address them.

Results: We are committed to our clients’ satisfaction and strive to meet and exceed our clients’ expectations.

IRA Financial Group will take care of everything. The whole process can be handled by phone, email, fax, or mail. Our expert tax and ERISA professionals are on site greatly reducing the set-up time and cost. Most importantly, you will find that our fee for this service is significantly less than other companies that perform the same or similar services.

Please contact one of our 401(k) Experts at 800-472-0646 for more information.

Jul 29

Saving for Retirement with a Small Budget

With so many people in today’s world just trying to make ends meet, it’s becoming tougher to save for retirement.  However, retirement should be one of your main financial goals.  Afterall, it’s the longest investment you’ll make in your lifetime and will go a long way in deciding when and how you retire.  Here are few things you can do to make saving a little more manageable.

The hardest thing to do is finding a great workplace retirement plan.  Not all jobs are the same and not all retirement plans are the same.  The most common, of course, is the 401(k) plan.  These can vary widely from funds offered to fees plus an employer match.  If two jobs are similar, it’s better to go with the one that has the best retirement option.  The employer match is especially critical since that’s free cash on top of your salary.  A typical match is 50% of your contributions up to 6% of your salary.  If you’re able to contribute $2,000 to this plan, your employer will kick in an extra $1,000 into your 401(k).  The best way to utilize a workplace plan is to have your contributions automatically withdrawn from your paycheck.  Therefore, you won’t be tempted to use the money elsewhere.

Saving for retirement should be a top priority no matter your incomeWhatever you can and do contribute to your retirement plan, that amount lessens your tax hit for the year.  If you contribute that same $2,000 in a year, your taxable income is now $2,000 less.  If you’re in the 15% tax bracket, that’s about $300 in savings.  Note: you will pay taxes on your contributions (and earnings) when you withdraw from that 401(k) during retirement.  Further, if you’re contributing to an IRA, you have until Tax Day of the next year to contribute (for a 401(k), you must contribute before the end of the year).

Next, there’s the retirement saver’s tax credit.  Lowe income workers can get an additional tax savings when contributing to a retirement plan.  The income limits for 2013 are as follows: for individuals, the max is $29,500, for head of household, it’s $44,250 and for couples, it’s $59,000.  You can receive a credit up to $1,000 for individuals and $2,000 for couples.  The credit rate is based on your income and your contribution.

Moreover, stick with low cost index funds.  Fees and maintenance costs are much lower than actively-managed funds whose expense ratio can be four to five times that of the index funds.

Lastly, if you’re early in your working career and/or expect to earn more money in the future, consider a Roth account (401(k) or IRA).  You pay the taxes now at the lower rate and your distributions will be tax-free come retirement.  Plus, you can access your contributions any time tax- and penalty-free.  Ideally, you should try to have both traditional and Roth accounts to better diversify your portfolio.

For many of us, it’s hard to think about retirement when it’s so far in the future.  But now’s the time to invest in your future while you have a substantial amount of time to let your money earn for you.  If you have any questions, feel free to contact the tax experts at the IRA Financial Group to figure out how you can best save for retirement.  Give them a call at 800.472.0646 or visit irafinancialgroup.com today!  Plus, don’t forget to follow us on Twitter! @Bergman401k

Jul 26

How to Use My 401k Retirement Funds to Buy a Business

Leaving your job or thinking of leaving your job and a have 401(k) qualified retirement plan or other type of retirement plan? Why not use your retirement funds to invest in yourself instead of a falling stock market? With the recent turmoil in the U.S. stock market and the downward trend expected to continue, why not use your 401(k) funds on a business you can run, manage, and even earn a salary from? Isn’t it time you placed your retirement future in your hands rather than trust Wall Street bankers?

 

With IRA Financial Group’s Business Acquisition structure, a new C Corporation is formed which will adopt a 401(k) Qualified Plan. Your existing retirement funds can then be rolled into the newly adopted 401(k) Plan tax-free. The 401(k) Plan will then purchase the stock of the new corporation. The new corporation will then use those funds to purchase a new business or franchise tax-free!

 

How to Use My 401(k) Retirement Funds to Buy a BusinessWith the IRS compliant Business Acquisition Structure, you can earn a reasonable salary from your new business or franchise. You can also use your new 401(k) Plan to make high tax-deductible contributions – $51,000 ($56,500 if you are over the age of 50) and even borrow up to $50,000 for any purpose.

 

What does the IRS Say about this?

 

The Internal revenue Code explicitly permits the purchase of corporate stock by a 401(k) Qualified Plan. The IRS has repeatedly confirmed that the structure is legal but has expressed some concern about the potential for abuse by individuals not being properly advised by tax professionals. For example, the IRS has documented the following instances of abuse when it comes to using retirement funds to invest in a business: (i) the employees of the business are not properly informed that a 401(k) qualified plan has been adopted by the business and that they are eligible to participate, (ii) the individual that established the structure with no intention to use for business purpose and the sole purpose for establishment was to get access to the retirement funds without penalty, or (iii) the structure would be used to purchase assets for personal use with the retirement funds.

 

Therefore, the IRS has stressed that it is imperative that when using retirement funds to establish or finance a new or existing business or franchise, it is necessary to work with qualified tax professionals who have experience in this area and can make sure the structure is established in full compliance with IRS and ERISA rules and procedures.

 

IRA Financial Group’s Business Acquisition structure is an IRS compliant legal structure that one can use to invest retirement funds into a business they will operate and be employed by. Work with IRA Financial Group’s in-house tax professionals to help establish your IRS compliant Business Acquisition Solution.

 

Using IRA Financial Group’s Business Acquisition Solution is the only way you will be able to use your retirement fund to legally start or finance a new or existing business tax-free and penalty free! Whereas, with a self-directed IRA LLC, an individual can invest retirement funds in a private business, but not a business that he or she would be involved in – that would be considered a prohibited transaction pursuant to Internal Revenue Code 4975. While, with a Solo 401K, an individual could only borrow up to $50,000 or 50% of his or her account value whichever is less and use that loan for any purpose, including starting or financing a business. However, if an individual required more than $50,000 for a business, then the Business Acquisition structure is the only solution that will allow one to use their retirement funds to start or finance a business tax-free and without penalty!

To learn more about the advantages of using a Business Acquisition Structure to start or finance a business using retirement funds, please contact a retirement expert at 800-472-0646.

Jul 25

The Different 401k Fund Options

The 401k plan has become the most popular savings vehicle for retirement, especially for younger people.  Most employers offer a plan as part of a benefits package to entice the best workers possible.  However, not all plans are the same and vary from employer to employer.  Funds to invest in also greatly vary and like funds might seem different based on their description from one plan to the next.  Here are the five most common types of funds found in most plans.

You have plenty to choose from when investing with your 401(k)The most prevalent fund available are stock funds.  These can be funds centered around small stocks, large and established stocks and international stocks.  Most of your funds should be invested in stock funds.  Experts agree that percentage you place in these stocks should reflect your age.  Take your age from 100 and that’s the percentage you should put into stock funds.  If you’re 25, you should invest 75% in stocks and 25% in bonds.  Of course, if you are more of a risk taker, you can invest more in stocks and vice versa.  Just don’t put too much in bonds since they earn just enough to keep up with inflation.  Choosing the types of funds you want also is based on your risk tolerance.  The safer bet are the large, more established U.S. stocks.  If you want to be more aggressive, look at smaller and/or international stocks.  You want to choose funds with low expense ratios and high long-term returns.

Another type of fund that is becoming more popular is the target date fund.  These use your expected retirement date to invest.  For example, if you turn 65 in the year 2040, your stock allocation will be much higher now and as you near that year, it will move more towards safer bonds.  As you near retirement, you don’t have enough time to ride the market roller coaster so it’s best to have a good percentage in bonds.  Target date funds are virtually maintenance free since they rebalance from year to year on their own.  Expenses can be a bit higher though and there is no room for tweaking the investments in the plan.

Next are blended fund investments.  These are similar to target date funds in that they mix both stocks and bonds.  However, they have a set ratio of the two.  A 50/50 split is not a good choice for the younger investor.  This is way too conservative and you’ll have a hard time reaching your retirement goals.  A much less conservative mix is better for you.

Then there’s bonds or managed income funds.  As stated already, these funds are very conservative and best utilized by those close to retirement.  They are used more to keep your money safe rather than grow it.  For younger investors, you don’t want too much allocated to these since they won’t help you earn the returns you need to retire on.

Lastly, there are money market funds.  These are basically like a CD and an alternative to cash.  These funds barely keep up with inflation and should only be utilized after you’ve met your retirement goals.

These are the basics of investing with a 401k.  There are other options out there (like a self-directed IRA) if you want to invest in more non-traditional investments such as real estate and precious metals.  If you have any questions, feel free to contact a tax expert at the IRA Financial Group @ 800.472.0646.

Jul 24

IRA Financial Group Introduces Newly Designed Solo 401(k) Annual Contribution Calculator Tool for 2013

Newly designed Solo 401(k) plan contribution calculator will allow individuals to calculate their maximum solo 401(k) plan annual capital contributions for 2013

IRA Financial Group, the leading facilitator of self-directed solo 401K Plans, announces the introduction of its newly designed online Solo 401(k) annual contribution calculator for the 2013 taxable year. The newly deigned online Solo 401(k) contribution calculator is a valuable tool that will allow an individual to calculate the maximum annual contribution to a solo 401K Plan, also known as an individual 401K Plan or self-directed 401K Plan for the 2013 taxable year. The free online contribution calculator tool will allow a Solo 401(k) Plan participant the ability to calculate their maximum annual Solo 401(k) contribution based on ones age as well as the type of entity they have (i.e. sole proprietorship, LLC, partnership, or corporation). “We are excited about offering our newly designed Solo 401(k) contribution calculator free of charge to better allow people to calculate their maximum annual solo 401(k) plan contributions, “ stated, Adam Bergman, a tax attorney with the IRA Financial Group. “The newly designed Solo 401(k) Plan calculator offers a new feature which will provide a detailed breakdown of the total amount of employee elective and profit sharing contributions that can be made to a Solo 401(k) Plan, annually, stated, Mr. Bergman.

Unlike a self directed IRA, a Solo 401k plan allows a plan participant to make high annual contributions to the Plan. The contributions can be in the form of pre-tax or Roth type contributions (after-tax).

Newly Designed Solo 401(k) Annual Contribution CalculatorThe annual Solo 401k contribution consists of 2 parts, an employee salary deferral contribution and an employer profit sharing contribution. In 2013 the total contribution limit for a Solo 401k is $51,000 or $56,500 if age 50 or older. The total allowable contribution limits are combined to get the maximum Solo 401k contribution limit.

Up to $17,500 per year can be contributed by the participant through employee elective deferrals. An additional $5,500 can be contributed for persons over age 50. These contributions can be up to 100% of the participant’s self-employment compensation.

Through the role of employer, an additional contribution can be made to the plan in an amount up to 25% of the participant’s self- employment compensation (20% if you are a Sole Proprietor or a Schedule C Tax Payer).

The IRA Financial Group was founded by a group of top law firm tax and ERISA professionals who have worked at some of the largest law firms in the United States, such as White & Case LLP, Dewey & LeBoeuf LLP, and Thelen LLP.

IRA Financial Group is the market’s leading “checkbook control” Self Directed IRA Facilitator. IRA Financial Group has helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate without custodian consent.  For more info call 800.472.0646 or visit our website @ irafinancialgroup.com

Jul 22

IRA Financial Group Introduces Individual 401(k) Asset Protection Plan

IRA Financial Group, the leading provider of self-directed IRA and Individual 401(k) Plans announces the introduction of the “Individual 401K Asset Protection Plan.” The “Individual 401(k) Asset protection Plan has been created to offer asset and creditor protection to retirement investors. “Because retirement accounts have become many Americans most valuable assets, we believe it is extremely important that our self-employed and small business retirement investors have the power to protect them from creditors or potential creditors, “ stated Adam Bergman, a tax attorney with the IRA Financial Group.

In general, retirement assets are protected from creditors inside of bankruptcy based on the 2005 Bankruptcy Act. The general exemption found in section 522 of the Bankruptcy Code, 11 U.S.C. 522, provides an unlimited exemption for retirement assets exempt from taxation for Section 401(a) (tax qualified retirement plans, pensions, profit-sharing and section 401(k) plans). Therefore, ERISA qualified plans as well as individual 401(k) plans are afforded full bankruptcy exemption.

Individual 401(k) Asset Protection Plan Outside of bankruptcy, an individual 401(k) plan benefits under a pension, profit-sharing, or section 401(k) plan are generally safe from creditor outside of bankruptcy due to ERISA and the Code’s broad anti-alienation protections. However, according to Mr. Bergman, “because case law and Department of Labor Regulations have held that such a plan that benefits only an owner (and/or an owner’s spouse) are not ERISA plans, thus voiding the anti-alienation protections generally afforded to ERISA plans. Thus, state law will govern the protection afforded to individual 401(k) Plans outside the bankruptcy context.”

Most states offer full creditor protection for individual 401(k) plan participants outside of bankruptcy. Aside from States such as Colorado, California, Michigan, and Rhode Island, most Individual 401(k) plan participants will have their individual 401(k) plan assets protected from creditors outside of bankruptcy. “Accordingly the Individual 401(k) Asset Protection Plan is such a popular option for the self-employed and small business owner seeking to protect their retirement assets from creditors,” stated Mr. Bergman.

The IRA Financial Group was founded by a group of top law firm tax and ERISA lawyers who have worked at some of the largest law firms in the United States, such as White & Case LLP, Dewey & LeBoeuf LLP, and Thelen LLP.

IRA Financial Group is the market’s leading provider of self directed 401k Plans. IRA Financial Group has helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate without custodian consent.

To learn more about the IRA Financial Group please visit our website at http://www.irafinancialgroup.com or call 800-472-0646.

Jul 19

Solo 401(k) Retirement Plan Solution For Real Estate Investors Seeking to Use Leverage Without Tax

New Solo 401(k) Plan Solution to allow real estate investors to use financing to purchase real estate without tax or penalty.

IRA Financial Group, the leading provider of self-directed Solo 401k plans announces the introduction of its new specially customized Solo 401(k) Plan for real estate investors which allows plan participants to use non-recourse financing for a real estate investment without triggering a tax or penalty. The tax attorneys have worked diligently to establish a specially customized retirement plan for real estate investors seeking to use leverage. In general, one may obtain financing through a loan or mortgage to finance a real estate purchase using a Solo 401(k). Solo 401(k) participants can also borrow up to either $50,000 or 50% of their account value – whichever is less to help finance a real estate investment. “With IRA Financial Group’s Solo 401(k) Plan a plan participant can use non-recourse financing to acquire real estate and not pay and tax or penalty, “ stated Adam Bergman, a tax attorney with the IRA Financial Group. “The great thing about using a Solo 401(k) Plan to buy real estate is that you can use leverage to increase the potential gains from the real estate investment,” stated Mr. Bergman.

When using a loan to purchase real estate with a Solo 401(k) Plan, the loan must be a nonrecourse loan. “A nonrecourse loan is not a traditional mortgage as due to the IRS prohibited transaction rules, the 401(k) plan participant cannot personally guarantee the loan, “ stated Mr. Bergman.

New Solo 401(k) Plan Solution to allow real estate investors to use financing to purchase real estate without tax or penalty. Under Internal Revenue Code Section 4975, a “prohibited transaction” is a transaction that, directly or indirectly involves the loan of money or other extension of credit between a plan and a disqualified person. Normally, when an individual purchases real estate with a mortgage, the traditional loan provides for recourse against the borrower (i.e., personal liability for the mortgage). However, if the 401(k) Plan purchases real estate and secures a mortgage for the purchase, the loan must be non-recourse; otherwise there will be a prohibited transaction. A non-recourse loan only uses the property for collateral. In the event of default, the lender can collect only the property and cannot go after the 401(k) Plan itself.

The advantages of using a Solo 401(k) Plan to purchase real estate is that a Solo 401K non-recourse loan can be used which could help leverage the property without triggering any tax or penalty. In contrast if using a self directed IRA LLC to purchase real estate, a tax would be imposed on the debt-financed portion of the property being purchased pursuant to Internal Revenue Code Section 514. Whereas, in the case of a Solo 401(k) Plan, pursuant to Internal Revenue Code Section 514(c)(9), the Unrelated Business Income Tax (UBTI) would not apply when using nonrecourse leverage as part of a real estate transaction (unrelated debt-financed income – UDFI). “Therefore, unlike a Self-Directed IRA LLCLLC, using a Solo 401(k) Plan to finance a real estate investment will not trigger UBTI – which imposes a tax in the range of 35% on all income/gains relating to the debt financed portion of the investment,” stated Mr. Bergman.

The IRA Financial Group was founded by a group of top law firm tax and ERISA lawyers who have worked at some of the largest law firms in the United States, such as White & Case LLP, Dewey & LeBoeuf LLP, and Thelen LLP.

IRA Financial Group is the market’s leading provider of self-directed IRA and solo 401(k) plans. IRA Financial Group has helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate without custodian consent.

To learn more about the IRA Financial Group please visit our website at http://www.irafinancialgroup.com or call 800-472-0646.

Jul 18

Are all Solo 401K Plans the Same?

When it comes to determining what type of 401(k) qualified retirement plan is best for a self-employed individual or small business owner with no employees, it is important to look at all the options the plan provides to make sure it will satisfy your retirement planning, tax, and investment goals.

Most financial institutions offer Solo 401K Plans, often called individual 401K Plans. However, if you do not want to be forced to invest all your hard earn retirement savings in the stock market, then these type of financial institution Solo 401(k) Plans are not very attractive. In addition, most financial institution Solo 401(k) Plans will not offer a loan feature or allow you to make Roth Type contributions.

Are all Solo 401K Plans the Same?IRA Financial Group’s Solo 401K plan is unique and so popular because it is designed explicitly for small, owner-only business.  There are many features of the IRA Financial Group’s Solo 401K plan that make it so appealing for small business owners.

High Contributions: Like all Solo 401K Plans, for 2012, IRA Financial Group’s Solo 401(k) Plan will allow a plan participant to make annual contributions up to $50,000 annually with an additional $5,500 catch-up contribution for those over age 50. The high contribution feature is one of the reasons a Solo 401K Plan is the most popular retirement vehicle for the self-employed.

Tax and Penalty free loan: Unlike most Solo 401K Plans offered by the traditional financial institutions such as Fidelity, IRA Financial Group’s Solo 401K Plan allows plan participants to borrow up to $50,000 or 50% of their account value (whichever is less) for any purpose, including paying credit card bills, mortgage payments, or anything else. The loan has to be paid back over a five-year period at least quarterly at a minimum prime interest rate (you have the option of selecting a higher interest rate).

Checkbook Control: The most attractive feature of the IRA Financial Group Solo 401k Plan is that it offers the plan participant checkbook control over his or her retirement funds. In the case of a conventional Solo 401K Plan offered by most financial institutions, the plan participant is relegated to making traditional investments such as stocks and or mutual funds. In addition, the Solo 401KPlan account is required to be opened at the financial institution. With IRA Financial Group’s Solo 401K Plan, the plan account can be opened at any local bank, including Chase, Wells Fargo, and even Fidelity. In addition, with IRA Financial Group’s Solo 401K Plan, the plan participant can make almost any traditional as well as non-traditional investments, such as real estate, precious metals, tax liens, and much more. With IRA Financial Group’s Solo 401K Plan, the Plan participant has the freedom to make the investments he or she wants while at the same time opening the 401K account at any local bank. As trustee of the Solo 401K Plan, the Plan Participant (you) can serve as the trustee providing you checkbook control over your retirement funds. With IRA Financial Group’s Solo 401K Plan, making a Solo 401K Plan investment is as simple as writing a check.

Roth Contributions & Conversion: Unlike a conventional Solo 401K Plan offered by most financial institutions, IRA Financial Group’s Solo 401K Plan contains a built in Roth sub-account which can be contributed to without any income restrictions. In addition, the IRA Financial Group’s Solo 401K Plan allows for the conversion of a traditional 401(k) or 403(b) account to a Roth subaccount. However, the Solo 401K Plan participant must pay income tax on the amount converted.

Offset the Cost of Your Plan with a Tax Deduction: By paying for your Solo 401(k) with business funds, you would be eligible to claim a deduction for the cost of the plan, including annual maintenance fees. The deduction for the cost associated with the Solo 401(k) Plan and ongoing maintenance will help reduce your business’s income tax liability, which will in-turn offset the cost of adopting a self-directed Solo 401(k) Plan. The tax attorneys at the IRA Financial Group will help you take advantage of the available business tax deduction for adopting a Solo 401(k) Plan.

Easy Administration: Like all Solo 401K Plans, IRA Financial Group’s Solo 401K Plan is easy to operate. There is generally no annual filing requirement unless your solo 401K Plan exceeds $250,000 in assets, in which case you will need to file a short information return with the IRS (Form 5500-EZ). However, unlike a financial institution, the tax professionals at the IRA Financial Group will assist you in completing this form is required.

To learn more about the advantages of the Solo 401K Plan with Checkbook Control please contact a 401K Expert at 800-472-0646.

Jul 17

Investing in a 401k as a Couple

If both you and your spouse work, you probably invest in multiple 401(k) plans through your employers.  These plans vary from business to business and your plans might be quite similar or strikingly different.  One may be limited in his or her investment options while the other may have access to a broader range of stocks, mutual funds and other investments.  Further, contributions and employer matches may differ greatly.  “Many 401(k) plans aren’t very well-diversified, so the couple needs to look at the offerings in their plan and see what asset classes are represented in each one of their plans and try to diversify as much as possible within their overall retirement investing strategy,” says Frank Armstrong, founder and principal of Investor Solutions in Miami.  Here are tips from foxbusiness.com for investing in your 401(k)s as a couple:

Asset allocation is an important role in saving for retirement. This means you invest in a wide array of asset classes such as stocks, bonds, cash and other investments.  The risk is lessened by the broader investments you make.  To accomplish this, you should figure out how long you have until you retire, your risk tolerance and your financial goals for the future.  The younger you are, the more risk you should take since you have plenty of time to let the market correct itself.  However, if you are nearing retirement, you should be safer and lean more towards conservative investments such as bonds.  Also note that it’s important not to have too much stock in your own company; this exposes you to higher risk.

Spouses needs to scrutinize each other's 401(k) plan.Next you need to figure out what each 401(k) offers you.  “Each plan should be evaluated separately for portfolio offerings; fees and expenses; loads and no-load funds; three-, five- and 10-year returns; and underlying securities,” says Ken Rupert of The Vita-Copia Group in Hampstead, Md.  Check out the types of funds offered by each plan and make sure they don’t have overlapping objectives.

Aside from your current employers’ 401(k) plans, you and/or your spouse may have previous 401(k)s or an IRA or two.  If you do have old 401(k)s, it’s a good idea to roll them over into an IRA for each spouse.  Not only will this simplify your portfolio, it will open up a broader spectrum of investment options.

Being tax-efficient is another big key.  Since traditional plans are tax-deferred, assets with higher taxes should be in those accounts.  Other assets should be in taxable accounts, such as a Roth IRA.  “Bonds, for example, throw off interest, which is taxed at ordinary income rates, while stock dividends and capital gains are taxed at a lower rate. So bonds are better in retirement accounts than stocks, in that situation,” he says.  Since Roth IRAs grow tax-free and there are no required minimum distributions, more aggressive investments should be invested here.

As is the case with any 401(k) plan, you should always be aware of your balance between stocks and bonds.  Re-balancing should be done regularly to maintain the risk tolerance you want for the account.  If a particular asset class has an up year, your balance might not be where you want it at the end of the year.  Some plans offer automatic re-balancing, check with your HR department and take full advantage of it.  Even still, you should check your accounts on a regular basis to make sure your investments are in line with your overall financial goals.

Lastly, avoid “bad funds”.  One of your plans might have awful investment choices.  If that’s the case, look to max out the better plan as best you can and only invest in the bad plan enough to receive the full employer match.  Jeff Nauta, a financial adviser with Henrickson Nauta Wealth Advisors in Belmont, Mich adds: “most plans, even the worst plans, usually have at least a “semi-decent” bond fund. If it’s not too expensive, put the entire bond allocation in the bad retirement plan, and in the better plan, spread out investments over several different types of stock funds.”

It can be tricky when trying to invest with two completely different 401(k) plans.  It’s best to speak with a retirement specialist to make sure you’re doing all you can for a comfortable retirement.  The tax experts at the IRA Financial Group are here to help make that a little bit easier.  Give them a call at 800.472.0646 or check out irafinancialgroup.com!