Nov 02

Learn Everything You Need to Know About a Solo 401(k) Plan

With a Solo 401(k) Plan – Make High Contributions, Borrow up to $50,000, and use your retirement funds to invest in real estate and much more tax free!

IRS Approved PlanIn 1981, the IRS formally described the rules for 401k Plans. The Solo 401(k) Plan is an IRS approved type of qualified plan. The Solo 401k plan” is not a new type of plan. It is a traditional 401k plan covering only one employee. The plans have the same rules and requirements as any other 401(k) plan. The surging interest in these Solo 401k plans is a result of the EGTRRA tax law change that became effective in 2002.

Before the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) became effective in 2002, there was no incentive for an owner-only business to establish a 401(k) plan because the business owner could generally receive the same benefits by adopting a profit sharing plan or SEP IRA. However, EGTRRA changed everything and turned the Solo 401(k) Plan into the most popular retirement plan for the self-employed. EGTRRA cleared the way for an owner-only business to defer more money into a retirement plan and to operate a more cost-effective, less complex type of plan. One of the key features of EGTRRA was that it added the employee deferral feature founded in a traditional multiple employee 401(k) Plan to the Solo 401(k) Plan. This feature turned the Solo 401(k) Plan into the retirement vehicle that provided the highest contribution benefits to the self-employed.

A Solo 401k plan is perfect for any sole proprietor, consultant, or independent contractor. A Solo 401(k) Plan offers the same abilities as a Self-Directed IRA LLC, but without having to hire a custodian or create an LLC. With the IRS approved Solo 401(k) Plan, roll over your existing IRA or 401(k) plan funds tax-free into a new Solo 401(k) Plan and use those funds to make tax-deferred investments, such as real estate, while also gaining the ability to borrow up to $50,000 as well as make annual plan contributions up to $60,000 – almost 10 times the amount of an IRA.

The Solo 401(k) Plan – The Ultimate Retirement & Investment Solution

A Solo 401(k) plan is an IRS approved retirement plan, which is suited for business owners who do not have any employees, other than themselves and perhaps their spouse. The “one-participant 401(k) plan” or individual 401(k) Plan is not a new type of plan. It is a traditional 401(k) plan covering only one employee.  Unlike a Traditional IRA, which only allows an individual to contribute $5500 annually or $6500 if the individual is over the age of 50, a Solo 401k Plan offers the Plan participant the ability to contribute up to $60,000 each year.  Before the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) became effective in 2002, there was no compelling reason for an owner-only business to establish a Solo 401(k) Plan because the business owner could generally receive the same benefits by adopting a profit sharing plan or a SEP IRA.  After 2002, EGTRRA paved the way for an owner only business to put more money aside for retirement and to operate a more cost-effective retirement plan than a Traditional IRA or 401(k) Plan.

There are a number of options that are specific to Solo 401(k) plans that make the Solo 401(k) plan a far more attractive retirement option for a self-employed individual than a Traditional IRA for a self-employed individual.

1. Maximize Your Retirement Nest Egg: A Solo 401(k) Plan includes both an employee and profit sharing contribution option, whereas, a Traditional IRA has a very low annual contribution limit.

Under the 2017 Solo 401(k) contribution rules, a plan participant under the age of 50 can make a maximum employee deferral contribution in the amount of $18,000. 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 $54,000.

For plan participants over the age of 50, an individual can make a maximum employee deferral contribution in the amount of $24,000. 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 $60,000.

Whereas, a Traditional IRA would only allow an individual with earned income during the year to contribute up to $5500, $6500 is the individual is over the age of 50.

2. Open Architecture Plan: IRA Financial Group’s Solo 401(k) Plan is an open architecture, self-directed plan that will allow you to make traditional as well as nontraditional investments, such as real estate by simply writing a check.  As trustee of the Solo 401(k) Plan, you will have “checkbook control” over your retirement assets and make the investments you want when you want.

The Solo 401k plan is unique and so popular because it is designed explicitly for small, owner only business.  The many features of the Solo 401k plan discussed above is why the Solo 401k Plan or Individual 401k Plan it so appealing and popular among self employed business owners

3. Borrow-Up to $50,000 Tax-Free: With a Solo 401K Plan you can borrow up to $50,000 or 50% of your account value, whichever is less.  The loan can be used for any purpose.  With a Traditional IRA, the IRA holder is not permitted to borrow even $1 dollar from the IRA without triggering a prohibited transaction.

It's Time To Let 401(k) Holders Invest Like the Pros 4. Buy Real Estate with Leverage Tax-Free: With a Solo 401(k) Plan, you can make a real estate investment using nonrecourse funds without triggering the Unrelated Debt Financed Income Rules and the Unrelated Business Taxable Income (UBTI or UBIT) tax (IRC 514).  However, the nonrecourse leverage exception found in IRC 514 is only applicable to 401(k) qualified retirement plans and does not apply to IRAs. In other words, using an IRA to make a real estate investment (Self Directed Real Estate IRA) involving nonrecourse financing would trigger the UBTI tax.

5. No Need to Establish an LLC:  With a Solo 401(k) Plan, the plan itself can make real estate and other investments without the need for an LLC, which depending on the state of formation could prove costly. Since a 401(k) plan is a trust, the trustee on behalf of the trust can take title to a real estate asset without the need for an LLC.

6. Strong Creditor Protection:  In general, a Solo 401(k) Plan offers greater creditor protection than a Traditional IRA.  The 2005 Bankruptcy Act generally protects all 401(k) Plan assets from creditor attack in a bankruptcy proceeding.  In addition, most states offer greater creditor protection to a Solo 401(k) qualified retirement plan than a Traditional IRA outside of bankruptcy.

7. Easy Administration: With a Solo 401(k) Plan there is no annual tax filing or information returns for any plan that has less than $250,000 in plan assets.  In the case of a Solo 401(k) Plan with greater than $250,000, a simple 2 page IRS Form 5500-EZ is required to be filed.  The tax professionals at the IRA Financial Group will help you complete the IRS Form.

8. IRS Audit Protection:  The Solo 401(k) Plan is an IRS approved qualified retirement plan.  IRA Financial Group’s Solo 401(k) Plan comes with an IRS opinion letter which confirms the validity of the plan and is a safeguard against any potential IRS audit.

9. Roth After-Tax Benefit: A Solo 401k plan can be made in pre-tax or Roth (after-tax) format.  Whereas, in the case of a Traditional IRA, contributions can only be made in pre-tax format.  In addition, a contribution of $18,000 ($24,000, if the plan participant is over the age of 50) can be made to a Solo 401(k) Roth account.

The Solo 40IK Solution

A Solo 401k Plan offers a self-employed business owner the ability to use his or her retirement funds to make almost any type of Solo 401k Planinvestment, 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 contributions (up to $60,000) as well as borrow up to $50,000 for any purpose. Have an investment opportunity, such as real estate or a business investment that you would love to make with your 401k funds? Want the ability to make high tax-deductible or Roth contributions? Need to access up to $50,000 of your retirement funds for personal use? Then the Solo 401k Plan is your solution!

With IRA Financial Group’s Solo 401k Plan– you now can:

  • Make maximum contributions nearly 10 times higher than the IRA.
  • For 2017, contribute up to $54,000 per year or $60,000 if you are over age 50. If your spouse is involved in the business, they can contribute an additional $54,000 (or $60,000 if they are over the age of 50) per year.
  • Invest in real estate, private companies, precious metals, and virtually anything else.
  • Borrow up to $50,000 from your Solo 401k Plan for any purpose.
  • No need to hire a custodian.
  • Gain control of your retirement funds – serve as trustee of the Solo 401k Plan.
  • Make Roth contributions to your Solo 401k Plan.
  • Use non-recourse leverage to purchase real estate without penalty or tax with your Solo 401k Plan.
  • Maintain a qualified retirement plan and help save for the future.
  • Diversify your retirement portfolio with a Solo 401k Plan!
  • Access your retirement funds to make the investments you want when you want tax-free!
  • Help grow your retirement funds tax-free with a Solo 401k Plan!
  • Make investment quickly without delay with a Solo 401k!
  • Make Solo 401k Plan investment decisions without requiring custodian consent!
  • Work directly with our retirement tax professionals to establish an IRS compliant Solo 401K Plan structure that works best for you and your investment goals.

Our Solo 401k Plan Establishment Service Includes:

  • Solo 401k Adoption Agreement
  • Solo 401k Basic Plan Document
  • EGTRRA Amendment
  • Solo 401k Summary Plan Description
  • Trust Agreement
  • Appointment of Trustee
  • Action by Board of Directors
  • Beneficiary Designation
  • Solo 401k Loan Procedure
  • Solo 401k Loan Documentation
  • Election Not To Participate
  • Transfer Request Forms for incoming funds transfers
  • Newly assigned Employer Identification Number from the IRS
  • IRS Determination letter stating that this is a Prototype Plan that meets the requirements of a qualified plan
  • Free tax and ERISA support on the Solo 401k Plan structure
  • Direct access to our on-site retirement tax professionals
  • Satisfaction Guaranteed!

We have developed a process that ensures speed and compliance, by using standardized procedures that work via phone, e-mail, fax, and mail. Your funds will be ready for investment into your new Solo 401k Plan within 24 hours.

Why Work With the IRA Financial Group?

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. Over the years, we have helped thousands of clients establish self-directed Solo 401(k) Plans. With our work experience at some of the largest law firms in the country, our retirement tax professionals’ tax and ERISA knowledge in this area is unmatched.

To learn more about the advantages of using a Solo 401(k) Plan, please contact one of our Solo 401(k) Plan experts at 800-472-0646 for more information.

You can use Solo 401(k) Plan funds to invest in a friend's business.

The Solo 401k Plan offers a 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 and tax-free! For more information on the Solo 401k Plan, check out the books by IRA Financial Group’s Adam Bergman entitled “Going Solo – America’s Best-Kept Retirement Secret For The Self-Employed” and “Solo 401(k) In A Nutshell” available on Amazon.

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Oct 21

Why Choose the IRA Financial Group for Your Solo 401k Plan?

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 401(k) Plan structures.

Work directly with our in-house retirement tax professionals to set-up an IRS compliant Solo 401(k) Plan. Our clients have direct access to our in-house retirement tax professionals to ensure that the Solo 401(k) 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 401(k) experts will take care of the entire set-up of your IRS compliant Solo 401(k) Plan. Our Solo 401(k) 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.

Why Choose the IRA Financial Group for Your Solo 401k Plan?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.

Innovative: 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.

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Jul 17

The Advantages of a Solo 401k v. a Self-Directed IRA

A Solo 401(k) plan is an IRS approved retirement plan, which is suited for business owners who do not have any employees, other than themselves and perhaps their spouse. The “one-participant 401(k) plan” or Individual 401(k) Plan is not a new type of plan. It is a traditional 401k plan covering only one employee. Unlike a Traditional IRA, which only allows an individual to contribute $5500 annually or $6500 if the individual is over the age of 50, a Solo 401k Plan offers the Plan participant the ability to contribute up to $57,500 each year. Before the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) became effective in 2002, there was no compelling reason for an owner-only business to establish a Solo 401(k) Plan because the business owner could generally receive the same benefits by adopting a profit sharing plan or a SEP IRA. After 2002, EGTRRA paved the way for an owner only business to put more money aside for retirement and to operate a more cost-effective retirement plan than a Traditional IRA or 401(k) Plan.

The Advantages of a Solo 401k v. a Self-Directed IRAThere are a number of options that are specific to Solo 401k plans that make the Solo 401k plan a far more attractive retirement option for a self-employed individual than a Traditional IRA for a self-employed individual.

1. Reach your Maximum Contribution Amount Quicker: A Solo 401(k) Plan includes both an employee and profit sharing contribution option, whereas, a Traditional IRA has a very low annual contribution limit.

Under the 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. 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.

Whereas, a Traditional Self-Directed IRA would only allow an individual with earned income during the year to contribute up to $5500, $6500 is the individual is over the age of 50.

For example, Joe, who is 60 years old owns 100% of an S Corporation with no full time employees. Joe earned $100,000 in self-employment W-2 wages for 2014. If Joe had a Solo 401(k) Plan established for 2014, Joe would be able to defer approximately $48,000 for 2014 (a $23,000 employee deferral, which could be pre-tax or Roth, and 25% of his compensation giving him $48,000 for the year). Whereas, if Joe established a Traditional Self-Directed IRA, Joe would only be able to defer approximately $6,500 for 2014.

2. No Roth Feature: A Solo 401k plan can be made in pre-tax or Roth (after-tax) format. Whereas, in the case of a Traditional Self Directed IRA, contributions can only be made in pre-tax format. In addition, a contribution of $17,500 ($23,00, if the plan participant is over the age of 50) can be made to a Solo 401(k) Roth account.

3. Tax-Free Loan Option: With a Solo 401K Plan you can borrow up to $50,000 or 50% of your account value what ever is less. The loan can be used for any purpose. With a Traditional Self-Directed IRA, the IRA holder is not permitted to borrow even $1 dollar from the IRA without triggering a prohibited transaction.

4. Use Non-recourse Leverage and Pay No Tax: With a Solo 401(k) Plan, you can make a real estate investment using non-recourse funds without triggering the Unrelated Debt Financed Income Rules and the Unrelated Business Taxable Income (UBTI or UBIT) tax (IRC 514). However, the non-recourse leverage exception found in IRC 514 is only applicable to 401(k) qualified retirement plans and does not apply to IRAs. In other words, using a Self-Directed SEP IRA to make a real estate investment (Self Directed Real Estate IRA) involving non-recourse financing would trigger the UBTI tax.

5. Open the Account at Any Local Bank: With a Solo 401k Plan, the 401k bank account can be opened at any local bank or trust company. However, in the case of a Traditional Self Directed IRA, a special IRA custodian is required to hold the IRA funds.

6. No Need for the Cost of an LLC: With a Solo 401(k) Plan, the plan itself can make real estate and other investments without the need for an LLC, which depending on the state of formation could prove costly. Since a 401(k) plan is a trust, the trustee on behalf of the trust can take title to a real estate asset without the need for an LLC.

7. Better Creditor Protection: In general, a Solo 401(k) Plan offers greater creditor protection than a Traditional IRA. The 2005 Bankruptcy Act generally protects all 401(k) Plan assets from creditor attack in a bankruptcy proceeding. In addition, most states offer greater creditor protection to a Solo 401(k) qualified retirement plan than a Traditional Self-Directed IRA outside of bankruptcy.

8. Easy Administration: With a Solo 401(k) Plan there is no annual tax filing or information returns for any plan that has less than $250,000 in plan assets. In the case of a Solo 401(k) Plan with greater than $250,000, a simple 2 page IRS Form 5500-EZ is required to be filed. The tax professionals at the IRA Financial Group will help you complete the IRS Form.

9. IRS Approved: The Solo 401(k) Plan is an IRS approved qualified retirement plan. IRA Financial Group’s Solo 401(k) Plan comes with an IRS opinion letter which confirms the validity of the plan and is a safeguard against any potential IRS audit.

10. Open Architecture Plan: IRA Financial Group’s Solo 401(k) Plan is an open architecture, self-directed plan that will allow you to make traditional as well as nontraditional investments, such as real estate by simply writing a check. As trustee of the Solo 401(k) Plan, you will have “checkbook control” over your retirement assets and make the investments you want when you want.

The Solo 401k plan is unique and so popular because it is designed explicitly for small, owner only business. The many features of the Solo 401k plan discussed above is why the Solo 401k Plan or Individual 401k Plan it so appealing and popular among self employed business owners.  For more information about this plan, please contact a tax expert at the IRA Financial Group @ 800.472.0646 today!

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