Nov 26

Avoid 401k Rollover Mistakes

You’ve recently left your job, or planning on it soon.  Don’t forget that old 401(k) you’ve invested your hard earned money in.  If you leave it at your old job, you might forget about it and lose out on retirement savings.  Here are a few things to consider when you leave one job for another.

First, if you haven’t left your job, check your vesting schedule.  (This is important with any job you have so even if you’ve started your new job already, check it out as well.)  What this is, is the time period in which you have to remain at a job to take your employer’s 401(k) contribution with you.  Any money you contribute to a company 401(k) is yours no matter what.  However, employer matches are not immediately yours in most cases.  Vesting schedules can be anywhere from six months to several years.  The employer match is the biggest benefit of contributing to a work-place 401(k) plan.  If you don’t receive that match, you would’ve been better off investing in your own plan, such as an IRA.  Delay the job switch (if you can) until you are 100% vested.

Know your options of what to do with your 401(k) when leaving a jobProbably the biggest mistake you can make when leaving jobs is cashing out your old 401(k).  The drawback is twofold.  First, you’ll owe the taxes on the amount cashed out plus if you’re under age 59 1/2, you’ll be hit with a 10% early withdrawal penalty.  Second, you miss out on the tax advantages of the plan.  The funds in your traditional 401(k) grow tax-deferred and are compounded.  For example, if you had $50,000 in your 401(k) and left it there for 30+ years, it would be worth over $400,000 earning 7%.  If you cash out and lose 30% for taxes and penalties, you only get $35,000.

In conjunction with that mistake is the 60-day rule.  If, when you leave your job, your employer issues you a check in your name for your 401(k) funds, you have 60 days to roll that money over into a new retirement plan (such as an IRA or your new 401(k) plan).  If you fail to move the money into a new plan before that time, the IRS will treat that money as a distribution and you will face the same penalties as if you cashed it out yourself.  Therefore, if your intention is to roll the money over, have your old 401(k) administrator issue a check to your new plan.  This is known as a trustee to trustee transfer.  This way, you will not be in possession of the funds and won’t forget to roll it over in a timely matter.

One mistake that especially true for younger people is not consolidating your old 401(k)’s.  You make go through half a dozen jobs (and as many 401(k) plans) before you find one that suits you.  If you don’t move those plans when you leave, you’ll end up with retirement money all over the place with no way to keep track of it.  Therefore, whenever you leave one job, be sure to do something with your old plan.  This way, you’ll know exactly how much money you have saved and what it’s invested in.

Lastly, familiarize yourself with net unrealized appreciation rules.  If you own appreciated company stock in your 401(k), you can withdraw some or all of it and owe taxes but only the cost basis of the stock.  The appreciation won’t be taxed until you sell the stock in the future.  The appreciation would then be taxed at long-term capital gains rate, which is much lower than ordinary income tax rates that normally apply to 401(k) distributions.

It’s important to know the facts when you decide to move from one job to another.  One thing to note is that if you leave a job to go on your own (say to open a business), you can look at a Solo 401(k) plan for your retirement needs.  This is only for self-employed individuals so if you start a business and hire employees, you need a different plan.  If you have any questions, please contact a tax expert from the IRA Financial Group @ 800.472.0646 today!

Nov 25

Solo 401(k) Plan Providers Expecting Strong Fourth Quarter Demand for Self-Directed Solo 401(K) Plan in 2013

Self-Directed Solo 401(K) Plans with checkbook control expected to see surge in interest from the self-employed for 2013

IRA Financial Group, the leading solo 401(k) Plan provider expects to see strong demand for its self-directed solo 401(k) Plan product from the self-employed and small business owners in the fourth quarter of 2013. “Because the contributions limits for 2014 will remain the same as 2013, many self-employed individuals and small business owners are looking to establish a solo 401(k) plan for the 2013 taxable years, “ stated Susan Glass, a retirement tax specialist with the IRA Financial Group.

Solo 401(k) Plan Providers Expecting Strong Fourth Quarter Demand for Self-Directed Solo 401(K) Plan in 2013A solo 401(k) Plan, also known as an individual 401k Plan offers one the ability to make annual contributions of up to $51,000 ($56,500 for those over the age of 50), borrow up to $50,000, as well as use his or her retirement funds to make almost any type of investment on their own tax-free and penalty free without requiring the consent of any custodian or person. “Establishing a solo 401k plan offers a self-employed business owner a number of exciting tax, retirement, and investment advantages, including the ability to defer up to $56,500 annually as well as gain greater control over their retirement plan investment options” stated Adam Bergman, a tax attorney with the IRA Financial Group. “IRA Financial Group’s solo 401(k) plan is unique and so popular because it is designed explicitly for the self-employed professional and small business owners with no full-time employees who want a flexible retirement plan with no burdensome annual administrative requirements, “ stated Mr. Bergman.

There are many features of the IRA Financial Group’s solo 401K plan that make it so appealing for small business owners for the 2013 taxable year. IRA Financial Group’s solo 401K plan will allow a plan participant to make annual contributions in 2013 up to $51,000 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. In addition, with IRA Financial Group’s solo 401k plan, a plan participant will be granted checkbook control over his or her retirement funds. With IRA Financial Group’s self directed solo 401K plan, the plan account can be opened at any local bank, including Chase, Wells Fargo, and even Fidelity. In addition, 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.

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 and Dewey & LeBoeuf LLP.

IRA Financial Group is the market’s leading “Checkbook Control” Self Directed IRA and Solo 401k Plan Facilitator. We have 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 tax-free and 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.  Be sure to like us on Facebook and follow us on Twitter!

Nov 22

The True Solo 401k Plan

The IRS approved solo 401(k) Plan has been used by hundreds of thousands of small businesses for over 30 years. However, the scope of options available to Solo 401(k) Plan participants is determined based on the plan documents. To this end, most financial institutions that offer Solo 401(k) Plan restrict the Plan participant to invest plan assets solely in their financial products and do not permit plan loans. Even though the IRS allows for 401(k) plans to invest in nontraditional investments, such as real estate, and allows for Plan loans (IRC 72(p)), those options are typically not offered by financial institutions because it would cut into the commissions they can earn from your plan investments. For example, if you use your 401(k) plan assets to purchase real estate or do a loan, you will have less money to buy their financial products.

 

A true Solo 401(k) lets you invest in just about anythingThe “True” Solo 401(k) Plan offered by the IRA Financial Group offers the self-employed business owner the ability to use his or her retirement funds to make almost any type of investment, including real estate, tax liens, private businesses, precious metals, and foreign currency on their own without requiring custodian consent tax-free! In addition, a Solo 401K Plan will allow you to make high contribution limits (up to $56,500) as well as borrow up to $50,000 for any purpose. Also, you will be able to open up the Solo 401(k) Qualified Plan Trust account at any local bank or credit union.

 

The True Solo 401(k) Plan Advantages

 

The IRA Financial Group’s “True” Solo 401K plan is unique and so popular because it is designed explicitly for small, owner only business.  There are many features of our “True” Solo 401(k) plan that make it so appealing and popular among self-employed business owners.

 

High Contribution Limits: For the salary deferral portion in 2012, you can contribute the regular 401(k) maximum of $17,000 (with an additional $5,500 if over the age of 50 at year end). And, you can add up to 25% of compensation for the profit-sharing portion. The combined maximum of these contributions can’t exceed $50,000, plus catch-up additions, if applicable ($55,500 if over the age of 50). Also, your Solo 401(k) Plan can be designed with a “designated Roth component”, if you desire it allowing you to make Roth type contributions (after-tax) to your Solo 401(k) Plan.

 

Under the 2014 new Solo 401(k) contribution rules, a plan participant under the age of 50 can make a maximum employee deferral contribution in the amount of $17,500. That amount can be made in pre-tax or after-tax (Roth). On the profit sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single member LLC) profit sharing contribution up to a combined maximum, including the employee deferral, of $52,000, an increase of $1,000 from 2013.

 

For plan participants over the age of 50, an individual can make a maximum employee deferral contribution in the amount of $23,000. That amount can be made in pre-tax or after-tax (Roth). On the profit sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single member LLC) profit sharing contribution up to a combined maximum, including the employee deferral, of $57,500, an increase of $1,000 from 2013.

 

Calculate Your Solo 401k Plan Maximum Contribution Limit Please click here to calulate your Solo 401(k) Plan Maximum Contribution Limit.

 

 

 

Loan Feature: With the “True” Solo 401k Plan, a plan participant is eligible 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, personal or business investments, a car, vacation, 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 noteworthy benefit of the “True” Solo 401k Plan is that it does not require the participant to hire a bank or trust company to serve as trustee. This flexibility allows the plan participant (you) to serve in the trustee role. This means that all assets of the 401(k) trust are under the sole authority of the Solo 401k participant.  A “True” Solo 401(k) plan allows you to eliminate the expense and delays associated with an IRA custodian, enabling you to act quickly when the right investment opportunity presents itself. Making a Solo 401K Plan investment is as simple as writing a check.

 

Flexible Contribution Options: With the “True” Solo 401(k) Plan, contributions are completely discretionary. You always have the option to try to contribute as much as legally possible, but you always have the option of reducing or even suspending plan contributions if necessary.

 

Roth Type Contributions: The “True” Solo 401(k) plan contains a built in Roth sub-account which can be contributed to without any income restrictions.

 

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 retirement tax professionals at the IRA Financial Group will help you take advantage of the available business tax deduction for adopting a Solo 401(k) Plan.

 

Cost Effective Administration: The “Tue” Solo 401(k) Plan is easy to operate and effortless to administer. There is generally no annual filing requirement unless your solo 401(k) Plan exceeds $250,000 in assets, in which case you will need to file a short information return with the IRS (Form 5500-EZ).

 

Roth Conversion: The “True” Solo 401(k) Plan allows for the conversion of pre-tax 401(k) funds to a Roth. However, the 401(k) Plan participant must pay income tax on the amount converted.

Financial Institution Solo 401(k) Plan

IRA Financial Group “True” Solo 401(k) Plan

High Contribution Limits (up to $51,000 if under the age of 50 and $56,500 if Participant is over 50 1/2)

Yes

Yes

Loan Feature (borrow up to $50,000 tax-free)

No

Yes

Traditional Investment Options (i.e. stocks and mutual funds)

Yes

Yes

Nontraditional Investment options (i.e. real estate, precious metals, tax liens, etc.)

No

Yes

Unlimited Investment Options

No

Yes

“Checkbook Control”

No

Yes

Roth sub-account

Yes

Yes

Roth conversion feature

No

Yes

Direct Access to your Retirement Funds

No

Yes

Serve as trustee of your Solo 401(k) Plan

Yes

Yes

Unlimited bankruptcy protection

Yes

Yes

 

Please contact one of our 401(k) Experts at 800-472-0646 for more information.  Be sure to follow us on Twitter and like us on Facebook too!

Nov 20

Mistakes Investors Make with Retirement Planning

You might know a little bit about investing in the markets, but unless this is your career, you probably only know enough to get you into trouble.  Trying to outperform the market usually costs you in the long run.  Think you can time the market?  Think again!  Avoid these pitfalls when investing in your retirement thanks to Forbes.com.

First and foremost, don’t procrastinate.  The more time your money has to grow, the more earning power it will have for you thanks to compounding.  Also, this is true from year to year.  Don’t wait until the end of the year to contribute a limp sum to your plan.  Again, this allows less time for your money to grow.  Plus, you’re better off contributing a little bit at a time so that you’re not stuck “buying high”.

Avoid mistakes when planning for retirementPatience is a virtue.  This is an even truer statement when it comes to investing.  Many people overreact to market trends.  When it’s soaring, they think they’re missing out and buy in.  The same is true when it’s in a decline.  They fear they’re losing too much and they get out.  This is the very definition of buying high and selling low.  Make a plan, set goals and stick with it.  Don’t get in (or out) based on something you heard or saw on TV.  Don’t obsess over the daily trends and focus on the long-term.

Diversify, diversify, diversify!  Just because one particular asset class in your 401(k) may be excelling, doesn’t mean you should dump everything there.  You should spread yourself across several different asset classes so if one falters, you’re still in good shape.  Another bad decision is having too much stock in your own company.  You put yourself at double the risk if the business fails.  Not alone would you lose your job, but your retirement savings as well.  Also, look into Roth plans that offer different benefits than traditional plans.

Cash isn’t always the safest bet.  You lose 2% per year due to inflation.  In ten years, the spending power of $100,000 today will equal $81,700 due to inflation.  You’re better off with an investment that earns 1% than sticking with cash.

Lastly, don’t forget to check in your accounts from time to time.  Rebalance as necessary so you don’t put yourself at too much (or too little) risk.  Keep track of fees and how to avoid them is possible.  If your plan seems too expensive, look elsewhere for more affordable rates.  Get in contact with an adviser who can help better manage your funds.

Most of these things are easy to take care of, you just need to take the time to make sure you’re funds are doing the most they can for you.  The tax experts at the IRA Financial Group can help you accomplish your retirement goals.  Give them a call at 800.472.0646 or visit their website today for more info!

Nov 19

IRA Financial Group to Offer Solo 401(k) Plan Contribution Master Guide for all Solo 401(k) Plan Clients

Solo 401(k) Plan master contribution guide will offer in-depth analysis of the Solo 401(k) plan contribution rules for 2013 and 2014

IRA Financial Group, the leading provider of IRS approved Solo 401(k) Plans announces the release of its 2013 and 2014 Solo 401(k) Plan Contribution Master Guide. The 2014 Solo 401(k) Plan Contribution Master Guide will provide IRA Financial Group clients with a detailed overview of the solo 401(k) plan contribution rules for 2013 & 2014, including the employee deferral and profit sharing rules. “The 2014 Solo 401(k) Plan Contribution Master Guide will be provided free to all Solo 401(k) Plan clients to allow for maximum retirement savings potential, “ stated Susan Glass, a tax professional with the IRA Financial Group.

IRA Financial Group to Offer Solo 401(k) Plan Contribution Master Guide for all Solo 401(k) Plan ClientsUnder the 2013 & 2014 Solo 401(k) contribution rules, a plan participant under the age of 50 can make a maximum employee deferral contribution in the amount of $17,500 to an IRA Financial Group solo 401(k) Plan. That amount can be made in pre-tax or after-tax (Roth). On the profit sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single member LLC) profit sharing contribution up to a combined maximum, including the employee deferral, of $51,000.

For plan participants over the age of 50, an individual can make a maximum employee deferral contribution in the amount of $23,000. That amount can be made in pre-tax or after-tax (Roth). On the profit sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single member LLC) profit sharing contribution up to a combined maximum, including the employee deferral, of $56,500.

The annual Solo 401k contribution rules consists of 2 parts, an employee salary deferral contribution and an employer profit sharing contribution. “The 2014 Solo 401(k) Plan Contribution Master Guide will help our Solo 401(k) Plan clients take advantage of the very attractive retirement benefits offered by the IRS approved Solo 401(k) Plan, “ stated Ms. Glass.

IRA Financial Group’s solo 401K plan is unique and so popular because it is designed explicitly for small, owner only business. With IRA Financial Group’s solo 401K plan, also known as an individual 401K plan, self-employed individuals or small business owners with no employees can benefit by making high annual contributions – up to $50,000 – with an additional $5,500 catch-up contribution for those over age 50, make traditional as well as non-traditional investments, such as real estate, as well as borrow up to $50,000 or 50% of their account value tax-free and penalty free. IRA Financial Group’s solo 401(k) plan is a trustee directed plan meaning the trustee and not the custodian is in charge of making investment decisions on behalf of the plan. With a solo 401(k) plan, in most cases the trustee will be the plan participant providing the plan participant with greater control and investment authority over his or her retirement funds. In addition, 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.

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 and Dewey & LeBoeuf LLP.

IRA Financial Group is the market’s leading “Checkbook Control” Self Directed IRA and Solo 401k Plan Facilitator. We have 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 tax-free and 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.  Be sure to follow us on Twitter and like us on Facebook!

Nov 18

What can You Invest in with a Solo 401k?

A Solo 401(k) Plan offers one the ability to use his or her retirement funds to make almost any type of investment on their own without requiring the consent of any custodian or person. The IRS and Department of Labor only describe the types of investments that are prohibited, which are very few.

The following are some examples of types of investments that can be made with your Solo 401(k) Plan:

  • Residential or commercial real estate
  • Domestic of foreign real estate
  • Raw land
  • Foreclosure property
  • Mortgages
  • Mortgage pools
  • Deeds
  • Private loans
  • Tax liens
  • Private businesses
  • Limited Liability Companies
  • Limited Liability Partnerships
  • Private placements
  • Precious metals and certain coins
  • Stocks, bonds, mutual funds
  • Foreign currencies

 

Solo 401k

 

Real Estate

The IRS permits using a Solo 401(k) to purchase real estate or raw land. Since you are the trustee of the 401(k) Plan, making a real estate investment is as simple as writing a check from your 401(k) Plan bank account. The advantage of purchasing real estate with your Solo 401(k) Plan is that all gains are tax-deferred until a distribution is taken (pre-tax 401(k) distributions are not required until the Plan Participant turns 70 1/2). In the case of a Roth Solo 401(k) Plan, all gains are tax-free.

For example, if you purchased a piece of property with your Solo 401(k) Plan for $100,000 and you later sold the property for $300,000, the $200,000 of gain appreciation would generally be tax-free. Whereas, if you purchased the property using personal funds (non-retirement funds), the gain would be subject to federal income tax and in most cases state income tax.

Tax Liens

The IRS permits the purchase of tax liens and tax deeds with a Solo 401(k) Plan. By using a Solo 401(k) Plan to purchase tax-liens or tax deeds, your profits are tax-deferred back into your retirement account until a distribution is taken (pre-tax 401(k) distributions are not required until the Plan Participant turns 70 1/2). In the case of a Roth Solo 401(k) Plan, all gains are tax-free.

More importantly, with a Solo 401(k) Plan, you, as trustee of the 401(k) Plan, will have “checkbook control” over your retirement funds allowing you to make purchases on the spot without custodian consent. In other words, purchasing a tax-lien or tax deed is as easy as writing a check!

Loans & Notes

The IRS permits using 401(k) funds to make loans or purchase notes from third parties. By using a Solo 401(k) Plan to make loans or purchase notes from third-parties, all interest payments received would be tax-deferred until a distribution is taken (pre-tax 401(k) distributions are not required until the Plan Participant turns 70 1/2). In the case of a Roth Solo 401(k) Plan, all gains are tax-free.

For example, if you used a Solo 401(k) to loan money to a friend, all interest received would flow back into your 401(k) Plan tax-free. Whereas, if you lent your friend money from personal funds (non-retirement funds), the interest received would be subject to federal and in most cases state income tax.

Private Businesses

With a Solo 401(k) you are permitted to purchase an interest in a privately held business. The business can be established as any entity other than an S Corporation (i.e. limited liability company, C Corporation, partnership, etc.). When investing in a private business using 401(k) funds, it is important to keep in mind the “Disqualified Person” and “Prohibited Transaction” rules under IRC 4975 and the Unrelated Business Taxable Income rules under IRC 512. The retirement tax professionals at the IRA Financial Group will work with you to develop the most tax-efficient structure for using your Solo 401(k) Plan to invest in a private business.

Precious Metals & Coins

Our Solo 401(k) Plan documents allow for investments into precious metals and certain coins. The advantage of using a Solo 401(k) Plan to purchase precious metals and/or coins is that their values generally keep up with, or exceed, inflation rates better than other investments. In addition, the metals and/or coins can be held in the name of the 401(k) Plan at a financial organization (any local bank) safe deposit box eliminating depository fees.

Foreign Currencies

The IRS does not prevent the use of 401(k) funds to purchase foreign currencies, including Iraqi Dinars. In fact, our Solo 401(k) Plan documents permit the purchase of foreign currencies. Many believe that foreign currency investments offer liquidity advantages to the stock market as well as significant investment opportunities.

By using a Solo 401(k) to purchase foreign currencies, such as the Iraqi Dinar, all foreign currency gains generated would be tax-deferred until a distribution is taken (pre-tax 401(k) distributions are not required until the Plan Participant turns 70 1/2). In the case of a Roth Solo 401(k) Plan, all gains are tax-free.

Stocks, Bonds, Mutual Funds, CDs

In addition to non-traditional investments such as real estate, a Solo 401(k) may purchase stock, bonds, mutual funds, and CDs. The advantage of using a Solo 401(k) Plan with “Checkbook Control” is that you are not limited to just making these types of investments. With a Solo 401(k) Plan with “checkbook control” you can open a stock trading account with any financial institution as well as purchase real estate, buy tax liens, or lend money to a third-party. Your investment opportunities are endless!

Don’t be stuck investing only in traditional assets at the major players like Fidelity and Vanguard.  With IRA Financial Group‘s Solo 401(k) Plan, you can invest in just about anything you want!  For additional information on the advantages of using a Solo 401K Plan to make investments, please contact one of our 401(k) Experts at 800-472-0646.  Be sure to follow us on Twitter and like us on Facebook!

Nov 15

Veterans Turning to Solo 401(k) Plan Loan as a Means of Financing New Start-Up Business

Solo 401(k) Plan loan will offer veterans up to $50,000 tax-free and penalty-free to use for a business-start-up or franchise

IRA Financial Group, the leading provider of self-directed solo 401(k) Plans, has seen an increase number of military veteran’s establish solo 401k plans in order to take advantage of the tax-free loan feature for purposes of financing a new business or franchise. “Our solo 401(k) Plan has allowed a significant number military veterans unlock over $7.5 million in retirement funds tax-free and penalty free in 2013,” stated Susan Glass, a senior paralegal with the IRA Financial Group. “The Solo 401(k) Plan loan feature contained in IRA Financial Group’s solo 401(k) Plan, allowed our military veterans to borrow up to $50,000 tax-free and penalty-free and use those funds for any business or entrepreneurial purpose,” stated Ms. Glass.

Veterans Turning to Solo 401(k) Plan Loan as a Means of Financing New Start-Up Business, According to IRA Financial Group AttorneyA solo 401k loan is permitted at any time using the accumulated balance of the solo 401k as collateral for the loan. A Solo 401(k) participant can borrow up to either $50,000 or 50% of their account value – whichever is less. This loan has to be repaid over an amortization schedule of 5 years or less with payment frequency no less than quarterly. The interest rate must be set at a reasonable rate of interest – generally interpreted as prime rate as per the Wall Street Journal. As of 11/13/13, the Wall Street Journal prime rate is 3.25%, which means participant loans may be set at very reasonable Interest rate. The Interest rate is fixed based on the prime rate at the time of the loan application.

According to Adam Bergman, a tax attorney with the IRA Financial Group, “as a result of the recent economic meltdown, banks and other financial institutions have severely limited their lending capacity to self-employed business owners, including military veterans. As a result, making it more difficult for veterans to secure the necessary financing for starting a new business. The Solo 401(k) plan is a perfect structure for any self-employed business owner seeking immediate funds for their business or to help pay personal expenses.” With IRA Financial Group’s Solo 401(k) plan, plan participants can borrow up to either $50,000 or 50% of their account value – whichever is less to help finance or operate their business.

According to Mr. Bergman, “over the last four years we have helped our clients get tax-free access to over $85 million in retirement funds via the Solo 401K loan feature that were used for personal and business related purposes.”

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 “checkbook control” self-directed IRA LLC retirement solutions. 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.

Nov 13

The Facts About the Solo 401k Plan

The Solo 401(k) Plan is essentially a regular, plain-old, vanilla 401(k) plan that has one participant, who is a self-employed individual, or that person and his or her spouse. There is some misinformation being disseminated about these plans and we would like to set the record straight. We want to let you know what is fact and what is fiction according to the Internal Revenue Service.

A 401(k) plan for a self-employed individual is a new kind of plan.

Fiction

The “one-participant 401(k) plan” is not a new type of plan. It is a traditional 401(k) plan covering only one employee. The plans have the same rules and requirements as any other 401(k) plan. The surging interest in these plans is a result of the EGTRRA tax law change that became effective in 2002. The law changed how salary deferral contributions are treated when calculating the maximum deduction limits for contributions to a 401(k) plan. This change created an opportunity for some people to put away additional amounts toward their retirement. The Solo 401(k) Plan is best suited for business owners who do not have any employees, other than themselves and perhaps their spouse.

I can make up to $56,500 of contributions to my 401(k) Plan as employee and employer each year.

Fact

The 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.

Under the 2013 new Solo 401(k) contribution rules, a plan participant under the age of 50 can make a maximum employee deferral contribution in the amount of $17,500. That amount can be made in pre-tax or after-tax (Roth). On the profit sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single member LLC) profit sharing contribution up to a combined maximum, including the employee deferral, of $51,000, an increase of $1,000 from 2012.

For plan participants over the age of 50, an individual can make a maximum employee deferral contribution in the amount of $23,000. That amount can be made in pre-tax or after-tax (Roth). On the profit sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single member LLC) profit sharing contribution up to a combined maximum, including the employee deferral, of $56,500, an increase of $1,000 from 2012.

 

Employee Elective Deferrals

In 2012, the employee deferral for a 401(k) plan is limited to the lesser of earned income or $17,000. This is called the 402(g) limit. If the employee is age 50 or older, an extra $5,500 may be deferred. This extra amount is called a “catch-up contribution.” These deferrals can be either pre-tax or, if the plan allows, after-tax contributions. The after-tax deferrals are known as designated Roth contributions.

Under the 2013 new Solo 401(k) contribution rules, a plan participant under the age of 50 can make a maximum employee deferral contribution in the amount of $17,500.

For plan participants over the age of 50, an individual can make a maximum employee deferral contribution in the amount of $23,000. That amount can be made in pre-tax or after-tax (Roth).

Employer Profit Sharing Contributions

Through the role of employer, an additional contribution can be made to the plan in an amount up to 25% of the participant’s K-1 or self-employment compensation (20% in the case of a Sole Proprietor or Schedule C Tax Payer).

Total Limit

In 2013, the maximum solo 401(k) plan contribution limitation is $51,000 and $56,500 for plan participants over the age of 50.

If the business owner’s spouse elects to participate in the Solo 401(k) and earns compensation from the business, the spouse is allowed to make separate and equal contributions increasing the couples’ annual total contribution to $102,000 for 2013 or $113,000 if both spouses over age 50.

Solo 401k contributions are flexible. Both the salary deferral and the profit sharing contributions are optional and can be changed at any time based on business profitability.

A Solo 401k participant can contribute to the plan as an employee and as employer.

As a Trustee of the Solo 401(k) Plan I can make investments in traditional and non-traditional investments, such a real estate.

Fact

A Solo 401(k) offers a self-employed business owner the ability to use their retirement funds to make almost any type of investment on their own, including real estate, tax liens, and precious metals without requiring the consent of any custodian or person.

Unlike an IRA, I can use a nonrecourse loan to purchase real estate with my 401(k) Plan?

Fact

When an IRA buys real estate that is leveraged with mortgage financing, it creates Unrelated Debt Financed Income (a type of Unrelated Business Taxable Income) on which taxes must be paid. A Solo 401(k) plan is exempt from UDFI pursuant to Section 514.

I can borrow the lesser of $50,000 or 50% of my 401(k) account value for any purpose?

Fact

A Solo 401k loan is permitted at any time using the accumulated balance of the solo 401k as collateral for the loan. A Solo 401(k) participant can borrow up to either $50,000 or 50% of their account value – whichever is less. This loan has to be repaid over an amortization schedule of 5 years or less with payment frequency no less than quarterly. The interest rate must be set at a reasonable rate of interest – generally interpreted as prime rate + 1%. As of 9/1/13 prime rate is 3.25%, which means participant loans are to be set at the very reasonable Interest rate of 4.25%. The Interest rate is fixed based on the prime rate at the time of the loan application.

As a self-employed individual I can defer $17,500 in pre-tax deferrals and $17,500 in after-tax deferrals (Roth).

Fiction

The answer is “No.” There is one limit per person for all types of elective deferrals. However, the $17,500 can be split in any ratio between the Roth and the pre-tax elective deferrals.

Employer contributions to a 401(k) Plan are due when the employer’s tax return is due.

Fact

Employer contributions are not required to be made until the due date of the employer’s tax return, plus extensions. So, in the case of a sole proprietor, this is when the 1040 is due – October 15, if an extension was filed.

If I have two jobs, I can contribute the maximum to both company’s plans.

Fiction

The 402(g) limits are by person, not by plan. For example, Steve, aged 40, is employed by Company X, and participates in Company X’s 401(k) plan. Steve defers the most allowed by Code section 402(g) for 2012, $17,000 ($17,500 for 2013). He also has his own business with a 401(k). He will not be able to defer anything in the self-employed 401(k) for 2012. This is because the Code section 402(g) limit applies to the individual and he has already deferred the maximum allowed for the year.

If I am the only participant and have a 401(k) plan, I don’t have to file any annual Form 5500 returns.

It depends

A Form 5500-EZ (or Form 5500) does not have to be filed for a plan year (other than the final plan year) that begins on or after January 1, 2011, if you have one or more one-participant plans that separately or together had total assets of $250,000 or less at the end of that plan year. In other words, if the assets of the plan or plans exceed $250,000, a Form 5500-EZ is required for a one-participant plan. The IRA-based plans almost never have an annual Form 5500 filing requirement, regardless of the value of the IRA assets.

If additional employees are hired, they don’t have to be covered under a 401(k) plan for self-employed individuals.

Fiction

Just because the plan is called Solo 401(k), it doesn’t mean that if the business is expanded and employees are added, the plan is only for one employee. If the new employee meets the eligibility requirements under the plan, then he or she will be required to enter the plan and be eligible for salary deferrals. Assuming that the new employee is a non-highly compensated employee, the plan is now subject to nondiscrimination testing, known as the ADP and ACP tests.

Please contact one of our 401k Experts at 800-472-0646 or visit irafinancialgroup.com for more information.

Nov 11

Why Choose the IRA Financial Group as Your Solo 401k Custodian

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.

Why Use the IRA Financial Group to Establish Your Solo 401(k)?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.

Our 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 Solo 401(k) Experts at 800-472-0646 for more information.  Be sure to like us on Facebook and follow us on Twitter!

Nov 07

2014 401(k) Contribution Levels Remain Unchanged

Recently, the IRS announced cost of living adjustments affecting dollar limitations for retirement plans for next year.  Since the Consumer Price Index “did not meet the statutory thresholds”, 401(k) limits remain unchanged from 2013.

2014 401(k) Contributions limits“The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $17,500.  The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $5,500.”

For the self-employed and small business owners, the amount they can save in a Solo 401(k) goes up from $51,000 in 2013 to $52,000 in 2014. That’s based on the amount they can contribute as an employer, as a percentage of their salary; the new compensation limit used in the savings calculation is $260,000, up from $255,000.

The limit used in the definition of a highly compensated employee remains unchanged at $115,000.

The maximum annual benefitthat may be funded through a defined benefit plan will increase to $210,000 from $205,000.  For a participant who separated from service before Jan. 1, 2014, the limit for defined benefit plans is computed by multiplying the participant’s compensation limit, as adjusted through 2013, by 1.0155.

The limit on employee elective deferrals to a SIMPLE 401(k) plan remains unchanged at $12,000.  The catch-up contribution remains at $2,500 as well.

If you have any questions, please contact a tax professional at the IRA Financial Group @ 800.472.0646!