Jun 17

What Are the Advantages of a Solo 401k Plan vs 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 $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 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 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.

What Are the Advantages of a Solo 401k Plan vs a Self-Directed IRA?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 Self-Directed IRA would only allow an individual with earned income during the year to contribute up to $5500, $6500 if 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 2017.  If Joe had a Solo 401(k) Plan established for 2017, Joe would be able to defer approximately $49,000 for 2017 (a $24,000 employee deferral, which could be pre-tax or Roth, and 25% of his compensation giving him $49,000 for the year).   Whereas, if Joe established a Traditional Self-Directed IRA, Joe would only be able to defer approximately $6,500 for 2017.

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 $18,000 ($24,00, 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 Nonrecourse Leverage and Pay No Tax: 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 a Self-Directed SEP IRA to make a real estate investment (Self Directed Real Estate IRA) involving nonrecourse 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.

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.

To learn more about the benefits of a Solo 401(k) Plan vs. a Self-Directed IRA, please contact a tax professional at 800-472-0646.

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May 11

Pass-Through Tax Cut May Impact Small Business Owner Retirement Savings Strategies

This article originally appeared on Forbes.com

President Donald Trump’s plan to cut the tax rate to 15 percent for so called pass-through businesses, such as partnerships, LLCs and S Corporations, will help many small business owners reinvest in their business by saving on taxes.  President Trump also plans to cut the corporate tax rate to 15 percent.  While many applaud the President’s plan to cut taxes on businesses, which they believe will help stimulate the U.S economy as well as make American businesses more competitive globally, the discrepancy in tax rates between businesses and individuals could prove problematic, especially for retirement savings.

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President Trump has announced that he plans to cut personal income tax rates by reducing the number of individual income tax brackets from seven to three — 10, 25 and 35 percent.  Individual tax rates currently have a ceiling of 39.6 percent and a floor of 10 percent. Most Americans pay taxes somewhere between the two.  With corporate and business pass through tax rates at 15 percent compared with generally higher individual income tax rates for most Americans, various tax planning opportunities will present themselves, including the ability to structure business payments at a 15 percent tax rate versus taking compensation at a generally higher income tax rate.  For example, under the Trump tax plan, if an LLC owner has $100,000 of net income currently taxed at 35 percent, the allocated portion that is compensation would be taxed at 35 percent while the portion that is allocated as business income would be taxed at a 15 percent tax rate. Thus, taking compensation of $20,000 versus $60,000 could save a significant amount of taxes.  Furthermore, since retirement savings is based on the amount of compensation one receives and not on the amount of profits the business generates, the less compensation one receives will directly impact the amount of retirement savings that may be available.  For example, a husband and wife business partnership would be incentivized to take less compensation and allocate more of the available income to business income in order to reduce their tax liability.  If the partnership has established a 401(k) plan or SEP IRA, the maximum amount they would be able to contribute would likely be reduced since their maximum plan contribution amount is directly based on the amount of compensation they earned from the business in a year.

In general, many economists believe that cutting taxes for small businesses is a positive plan by the president.  However, sizable tax rate discrepancies between different forms and categories of income could create decisions that are more tax than business based and run counter to the principles of tax neutrality.  In addition, such circumstances will likely invite abusive tax schemes, as well as some unanticipated results, such as a potential cut in retirement savings for small business owners.

For more information, please contact the IRA Financial Group @ 800.472.0646.

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Apr 26

If You Have a Solo 401k, Do You Need to Pay a Custodian?

If You Have a Solo 401k, Do You Need to Pay a Custodian?No. The most significant cost benefit of the Solo 401(k) Plan is that it does not require the participant to hire a bank or trust company to serve as trustee. This flexibility allows the participant to serve in the trustee role. This means that all assets of the 401(k) trust are under the sole authority of the Solo 401(k) participant.  A 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.

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

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Apr 17

Why Choose an IRA Financial Group Solo 401k Vs Charles Schwab

The Solo 401K Plan, also known as the Individual 401K or Self Directed 401K Plan is an IRS approved plan that was designed specifically for the self-employed or small business owner with no employees other than the owners(s). Since the adoption of the 2002 Economic Growth and Tax Reconciliation Act, the Solo 401K Plan has become the most popular retirement plan for the self-employed.

When it comes to deciding what type of Solo 401K plan is best for you and your business, 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.

IRA Financial Group Vs. Vanguard Solo 401k PlanMost banks and financial institutions, such as Charles Schwab offer Solo 401K Plans. The Solo 401K Plans are typically quite restrictive and only permit the plan participant to make limited investments without benefiting from most of the available IRS approved options such as the tax-free loan and Roth contributions. However, if you do not want to be forced to invest all your hard earn retirement savings in the stock market, than the Charles Schwab Solo 401K Plans may end up not being very attractive. In addition, the Charles Schwab Solo 401K Plans will not offer a loan feature or allow you to make Roth Type contributions.

IRA Financial Group’s Solo 401K plan is unique and so popular because it is designed explicitly for small, owner only business.

Unlike Charles Schwab’s Solo 401K Plan, by adopting IRA Financial Group’s Solo 401K Plan, you can serve as trustee of the plan and make traditional investments as well as non-traditional investments such as real estate tax-free and without custodian consent.

Have an investment you want to make with your retirement funds, like real estate, but Charles Schwab won’t let you do it even though it ‘s approved by the IRS? Then IRA Financial Group’s Solo 401K Plan is your solution.

Make high Tax-Free Contributions: Similar to the Charles Schwab Solo 401K Plan, with IRA Financial Group’s Solo 401K Plan you can to make tax-deductible annual contributions up to $54,000 annually with an additional $6,000 catch up contribution for those over age 50 for 2017.

Tax-Free Loan: Charles Schwab Solo 401K Plan offers no loan feature, while 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. 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 significant advantage of the IRA Financial Group Solo 401k Plan versus the Charles Schwab Solo 401K Plan is that it offers you checkbook control over your retirement funds. With the Charles Schwab Solo 401K Plan, 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 Charles Schwab. 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, third-party lending, notes, stock, private business, 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 to open the 401K account at any local bank or credit union. With IRA Financial Group’s Solo 401K Plan, you can serve as the trustee of the plan giving you checkbook control over your retirement funds. In contrast to Charles Schwab’s Solo 401K Plan, which restricts your investment opportunities to stocks and mutual funds, with IRA Financial Group’s Solo 401K Plan, making a traditional as well as non-traditional investment such as real estate is as simple as writing a check.

After-Tax Contributions: Charles Schwab’s Solo 401K Plan does not allow for Roth or after-tax contributions. 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, Charles Schwab’s Solo 401K Plan does not allow for in-plan Roth conversions or rollovers. Whereas, IRA Financial Group’s Solo 401K Plan allows for in-plan Roth conversions. However, the Solo 401K Plan participant must pay income tax on the amount converted.

Easy Administration: Like Charles Schwab’s Solo 401K Plan, 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). 
Unlike Charles Schwab, however, the tax attorneys at the IRA Financial Group will assist you in completing this form is required

No Tax on Real Estate Financing: Since the Charles Schwab Solo 401K Plan does allow for real estate investments, you would not be able to benefit from the ability to use nonrecourse financing tax-free when making real estate investments with Solo 401K retirement funds. IRA Financial Group’s Solo 401K Plan will allow one to use nonrecourse leverage tax-free when making real estate investments with plan assets.

IRA Financial Group will take care of setting up your entire Solo 401k Plan. The whole process can be handled by phone, email, fax, or mail and typically takes between 2-7 days to complete, the timing largely depending on the state of formation and the custodian holding your retirement funds. Our 401k experts and tax and ERISA attorneys are on site greatly reducing the set-up time and cost. Most importantly, each client of the IRA Financial Group is assigned a tax attorney to help with the establishment of the Solo 401k Plan. You will find that our fee for this service is significantly less than other companies that perform the same or similar services.

To learn more about the advantages of choosing the IRA Financial Group’s Solo 401K Plan over the Charles Schwab Solo 401K Plan, please contact a tax professional at 800-472-0646 or visit www.irafinancialgroup.com.

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Apr 10

Can You Make Contributions to Both a Solo 401k and a SEP IRA?

Yes. You can make contributions to both a SEP and a Solo 401K Plan. In other words, a business can have both a SEP IRA and a Solo 401(K) Plan, although, there is generally no advantage for a business to have both active at the same time.

A Solo 401(k) Plan includes both an employee and profit sharing contribution option, whereas, a SEP IRA is purely a profit sharing plan.

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 SEP IRA would only allows for a profit sharing contribution. Hence, a participant in a SEP IRA would be limited to 25% (20% in the case of a sole proprietorship or single member LLC) profit sharing contribution up to a combined maximum of $54,000 for 2017. No employee deferral exists for a SEP IRA.

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 2017. If Joe had a Solo 401(k) Plan established for 2017, Joe would be able to defer approximately $49,000 for 2017 (a $24,000 employee deferral, which could be pre-tax or Roth, and 25% of his compensation giving him $49,000 for the year). Whereas, if Joe established a SEP IRA, Joe would only be able to defer approximately $25,000 (25% if his compensation) for 2017.

In other words, having both a SEP IRA and a Solo 401(k) Plan will not allow a business owner to defer more than $54,000 ($60,000 if the individual is over the age of 50) for 2017. Most individuals will use a Solo 401(k) Plan vs. a SEP IRA since you can reach the maximum annual contribution limit quicker than a SEP IRA since the Solo 401(k) Plan includes both an employee deferral and profit sharing component, whereas, a SEP IRA just includes just a profit sharing component.

To learn more about the benefits of a Solo 401(k) Plan vs. a SEP IRA, please contact a tax professional at 800-472-0646.

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Mar 17

IRA Financial Group Vs. Vanguard Solo 401k Plan

The Solo 401K Plan, also known as the Individual 401K or Self Directed 401K Plan is an IRS approved plan that was designed specifically for the self-employed or small business owner with no employees other than the owners(s). Since the adoption of the 2002 Economic Growth and Tax Reconciliation Act, the Solo 401K Plan has become the most popular retirement plan for the self-employed.

When it comes to deciding what type of Solo 401K plan is best for you and your business, 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.

IRA Financial Group Vs. Vanguard Solo 401k PlanMost banks and financial institutions, such as Vanguard offer Solo 401K Plans. The Solo 401K Plans are typically quite restrictive and only permit the plan participant to make limited investments without benefiting from most of the available IRS approved options such as the tax-free loan and Roth contributions. However, if you do not want to be forced to invest all your hard earn retirement savings in the stock market, than the Vanguard Solo 401K Plans may end up not being very attractive.  In addition, the Vanguard Solo 401K Plans will not offer a loan feature or allow you to make Roth Type contributions.

IRA Financial Group’s Solo 401K plan is unique and so popular because it is designed explicitly for small, owner only business.

Unlike Vanguard’s Solo 401K Plan, by adopting IRA Financial Group’s Solo 401K Plan, you can serve as trustee of the plan and make traditional investments as well as non-traditional investments such as real estate tax-free and without custodian consent.

Have an investment you want to make with your retirement funds, like real estate, but Vanguard won’t let you do it even though it ‘s approved by the IRS?  Then IRA Financial Group’s Solo 401K Plan is your solution.

Make high Tax-Free Contributions: Similar to the Vanguard Solo 401K Plan, with IRA Financial Group’s Solo 401K Plan you can to make tax-deductible annual contributions up to $54,000 annually with an additional $6,000 catch up contribution for those over age 50 for 2017.

Tax-Free Loan:  Fidelity Solo 401K Plan offers no loan feature, while 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. 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 significant advantage of the IRA Financial Group Solo 401k Plan versus the Vanguard Solo 401K Plan is that it offers you checkbook control over your retirement funds. With the Vanguard Solo 401K Plan, 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 Vanguard.  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, third-party lending, notes, stock, private business, 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 to open the 401K account at any local bank or credit union. With IRA Financial Group’s Solo 401K Plan, you can serve as the trustee of the plan giving you checkbook control over your retirement funds. In contrast to Vanguard’s Solo 401K Plan, which restricts your investment opportunities to stocks and mutual funds, with IRA Financial Group’s Solo 401K Plan, making a traditional as well as non-traditional investment such as real estate is as simple as writing a check.

After-Tax Contributions: Vanguard’s Solo 401K Plan does not allow for Roth or after-tax contributions. 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, Vanguard’s Solo 401K Plan does not allow for in-plan Roth conversions or rollovers.  Whereas, IRA Financial Group’s Solo 401K Plan allows for in-plan Roth conversions. However, the Solo 401K Plan participant must pay income tax on the amount converted.

Easy Administration:  Like Vanguard’s Solo 401K Plan, 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). 
Unlike Vanguard, however, the tax attorneys at the IRA Financial Group will assist you in completing this form is required

No Tax on Real Estate Financing:  Since the Vanguard Solo 401K Plan does allow for real estate investments, you would not be able to benefit from the ability to use nonrecourse financing tax-free when making real estate investments with Solo 401K retirement funds. IRA Financial Group’s Solo 401K Plan will allow one to use nonrecourse leverage tax-free when making real estate investments with plan assets.

IRA Financial Group will take care of setting up your entire Solo 401k Plan. The whole process can be handled by phone, email, fax, or mail and typically takes between 2-7 days to complete, the timing largely depending on the state of formation and the custodian holding your retirement funds. Our 401k experts and tax and ERISA attorneys are on site greatly reducing the set-up time and cost. Most importantly, each client of the IRA Financial Group is assigned a tax attorney to help with the establishment of the Solo 401k Plan. You will find that our fee for this service is significantly less than other companies that perform the same or similar services.

To learn more about the advantages of choosing the IRA Financial Group’s Solo 401K Plan over the Vanguard Solo 401K Plan, please contact a tax professional at 800-472-0646 or visit www.irafinancialgroup.com.

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Mar 15

Learn About the Self-Directed 401k Plan

A Solo 401K Plan, also called a Self-Directed 401K, offers a self employed business owner the ability to use their retirement funds to make almost any type of investment tax-free, including real estate, on their own without requiring custodian consent. Additionally, a Self-Directed 401K Plan will allow you to make high contributions to the Plan (up to $54,000 for plan participants under the age of 50 and $60,000 for plan participants over the age of 50) as well as borrow up to $50,000 for any purpose.

Advantages of Using a Self-Directed 401K

The Self-Directed Solo 401K Plan is such a popular retirement solution for small business owners because the IRS designed it specifically for them. Unlike other 401(k) Plans, which restrict plan investments to just stocks and mutual funds, IRA Financial Group’s Self-Directed 401K Plan is designed specifically to allow plan participants to diversify their retirement portfolio by making traditional as well as non-traditional investments such as real estate and precious metals. The Individual 401K Plan can be adopted by a sole proprietorship, LLC, Partnership, or Corporation.

There are a number of features that make the Self-Directed 401K Plan so appealing and popular among self -employed business owners.

High Contribution Limits: 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.

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

Tax-Free Loan: With a Self-Directed 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 personal expenses such as 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). There is no pre-payment penalty.

Checkbook Control”: One of the most popular aspects of the Self-Directed 401K Plan is that it does not require the participant to hire a bank or trust company to serve as trustee. Unlike, an IRA which requires a financial institution to serve as trustee and custodian of the IRA, in the case of a Self-Directed 401K Plan, the plan account can be opened at any local bank or credit union and the plan participant can serve as trustee of the Self-Directed 401K. This flexibility allows the plan participant (you) to gain “checkbook control” over your retirement funds. In essence, all assets of the Self-Directed 401K Plan will be under the sole authority of the 401k participant.  A Self-Directed 401K 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. With a Self-Directed 401K Plan, making a 401K Plan investment is as simple as writing a check.

It's Time To Let 401(k) Holders Invest Like the Pros A World of Investment Opportunity: With a Self-Directed 401K, you will be able to invest in almost any type of investment opportunity that you discover, including: Real Estate (rentals, foreclosures, raw land, tax liens etc.), Private Businesses, Precious Metals, Hard Money & Peer to Peer Lending as well as stock and mutual funds; you’re only limit is your imagination. The income and gains from these investments will flow back into your Self-Directed 401K Plan tax-free!

Use Leverage Tax-Free: When an IRA buys real estate that is leveraged with nonrecourse mortgage financing, it creates Unrelated Debt Financed Income (a type of Unrelated Business Taxable Income) on which taxes must be paid pursuant to Internal Revenue Code Section 514. A Self-Directed 401K plan is generally exempt from UDFI. What this means is that unlike an IRA, Internal Revenue Code Section 514(c)(9), allows a Self-Directed 401K plan to use nonrecourse leverage to make a real estate acquisition without tax or penalty.

Roth Contributions: The Self-Directed 401K Plan contains a built in Roth sub-account which can be contributed to without any income restrictions. A Self-Directed 401K Plan will allow you to make pre-tax and/or after-tax (Roth) employee deferral contributions to your Plan.

Easy Administration:  The Self-Directed 401K Plan is easy to operate and effortless to administer. There is generally no annual filing requirement unless the assets in your Self-Directed 401K Plan exceeds $250,000, in which case you will need to file a short information return with the IRS (Form 5500-EZ).

Roth Conversion: The Self-Directed 401K Plans allows for the conversion of pre-tax 401K funds to an after-tax Roth sub-account. However, the 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 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.

Asset & Creditor Protection: In the case of a bankruptcy, 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). Thus, ERISA qualified plans, as well as Self-Directed 401K plans, are afforded full bankruptcy exemption. Outside of bankruptcy, state law will govern whether Self-Directed Solo 401K Plan assets are protected from creditors. Most states will provide protection for Self-Directed Solo 401K Plan assets from creditors outside of the bankruptcy context.

IRA Financial Group will take care of setting up your entire Self-Directed 401K Plan. The whole process can be handled by phone, email, fax, or mail and typically takes between 2-10 days to complete, the timing largely depending on the time it takes your current retirement asset custodian to move the funds to the new Self-Directed 401K Plan account. Our tax and ERISA professionals are on-site greatly reducing the set-up time and cost. Most importantly, each client of the IRA Financial Group is assigned a retirement tax professional to help with the establishment of the Self-Directed 401K Plan.

For additional information on the Self-Directed 401(k) Plan, please contact us at 800-472-0646.

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Jan 30

Why You Should Go Roth with Your Solo 401k

The Roth Solo 401K Plan is the ultimate tax-free retirement solution for the self-employed. With federal and state income tax rates expected to increase in the future, gaining the ability to generate tax-free returns from your retirement investments when you retire is the last surviving legal tax shelter. With a Roth Solo 401K you can make almost any investment tax-free, including real estate, tax liens, precious metals, currencies, options, and private business investments and once you hit the age of 59 1/2 you will be able to live off your Roth 401K assets without ever paying tax. Imagine if someone told you that if you started making Roth 401K contributions in your forties and by just generating a modest rate of return, you could have over a million dollars tax-free when you retire. With a Roth 401K, live off the Roth 401K investment income tax-free or take a portion of your Roth 401K funds and use it for any purpose without ever paying tax.

The Roth Solo 401K Plan Advantages

Power of Tax-Free Investing: One of the main attractions to the self-directed Roth Solo 401(k) plan is based on the fact that qualified distributions of Roth earnings are tax-free. As long as certain conditions are met and the distribution is a qualified distribution, the Roth solo 401(k) plan participant will never pay tax on any Roth distributions received. The advantage of contributing to a Roth solo 401(k) plan is that income and gains generated by the Roth 401(k) investment can be tax-free and penalty-free so long as certain requirements are satisfied. Unlike with a pre-tax solo 401(k) plan contributions, contributions to a Roth solo 401(k) are not tax deductible.

Why You Should Go Roth with Your Solo 401kThe power of tax-free investing can be best illustrated by way of the following examples:

Example 1: Joe, a self-employed consultant began funding a Roth solo 401(k) plan with $3,000 per year at age 20 and would continue on through age 65. At age 65 Joe would wind up with $2.5 million at retirement (assuming they earn the long-run annual compound growth rate in stocks, which was 9.88 percent from 1926 to 2011). Not a bad result for investing only $3,000 a year.

Example 2: Ben, a self-employed real estate agent, who is 30 years began funding a Roth solo 401(k) plan with $8000 and wanted to know how much he would have at age 70 if he continued to make $8000 annual contributions and was able to earn at an 8% rate of return. Ben did some research and was astonished that at age 70 he would have a whopping $ 2,238,248 tax-free which he can then live off or pass to his wife or children tax-free.

Example 3: Mary, a self-employed real estate investor, who is 35 years began funding a Roth solo 401(k) plan with $13000 and wanted to know how much she would have at age 70 if she continued to make $13000 annual contributions and was able to earn at a 10% rate of return, which she felt was possible based off her past real estate investment returns. Mary did some research and was astonished that at age 70 she would have a whopping $ 3,875,649 tax-free which she could then live off or pass to her husband and children tax-free.

I am sure it may be hard for some of you to comprehend that putting away just a few thousand dollars a year in a Roth Solo 401(k) plan can leave you with millions of dollars tax-free. It’s as simple as making annual contributions to your Roth Solo 401(k) Plan and then generating tax-free returns from making real estate or other investments with your solo 401(k) plan.

High Contributions: A Roth Solo 401(k) combines features of the traditional 401(k) with those of the Roth IRA. Like a Solo 401K Plan, the Roth Solo 401K Plan is perfect for any self-employed individual or small business owner with no employees. The Roth Solo 401K Plan contains the same advantages of a Solo 401(k) Plan, but as with a Roth IRA, contributions are made with after-tax dollars. While you don’t get an upfront tax-deduction, the Roth 401K account grows tax-free, and withdrawals taken during retirement aren’t subject to income tax, provided you’re at least 59 1/2 and you’ve held the account for five years or more.

The Roth Solo 401(k) can offer advantages to self-employed individuals who wish to maximize their ability to generate tax-free retirement savings while receiving the ability to invest in real estate, precious metals, private businesses or funds tax-free and without custodian consent.

Unlike a Roth IRA, which limits individual Roth IRA contributions to $5,500 annually ($6,500 if the individual is 50 years or older), in 2017, with a Roth Solo 401(k) account, an individual can make Roth (after-tax) contributions of up to $18,000, or $24,000 for those 50 or older by the end of the year — allowing individuals to stock away thousands of dollars more in tax-free retirement income than they would through a Roth IRA.

A Roth Solo 401(k) is perfect for sole proprietors, small businesses and independent contractors such as consultants. The Roth Solo 401(k) plan is unique and so popular because it is considered the last remaining legal tax shelter available. There are so many features of the Roth Solo 401(k) plan that make it so appealing and popular among self-employed business owners.

Unlimited Investment Opportunities: With a Roth 401(k) Plan or Roth 401(k) plan sub-account, you can invest your after-tax Roth 401(k) Plan funds in real estate, precious metals, tax liens, private business investments, and much more tax-free! Unlike with a pre-tax 401(k) Plan, with a Roth 401(k) account, all income and gains would flow back tax-free to your account. As long as you have reached the age of 59 1/2 and have had the Roth 401(k) account opened at least five years, you can take Roth 401(k) Plan distributions tax-free. In other words, you can live off your Roth 401(k) Plan assets or income tax-free. With federal income tax rates expected increase, the ability to have a tax-free source of income upon retirement may be the difference between retiring early or not.

Loan Feature: While an IRA offers no participant loan feature, the Roth Solo 401k allows participants to borrow up to $50,000 or 50% of their account value (whichever is less) for any purpose at a low interest rate (the lowest interest rate is Prime which is 3.75% as of 1/1/17). This offers a Roth Solo 401(k) Plan participant the ability to access up to $50,000 to use for any purpose, including paying personal debt or funding a business.

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: In general, the Roth solo 401(k) plan is easy to operate. 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).

Exemption from UDFI: When an IRA buys real estate that is leveraged with mortgage financing, it creates Unrelated Debt Financed Income (“UDFI”) – a type of Unrelated Business Taxable Income (also known as “UBTI” or “UBIT”) on which taxes must be paid. The UBTI tax is approximately 40% for 2017. Whereas, with a Roth Solo 401(k) plan, you can use leverage without being subject to the UDFI rules and UBTI tax. This exemption provides significant tax advantages for using a Roth Solo 401(k) Plan versus an IRA to purchase real estate.

To learn more about the Roth Solo 401(k) Plan, please contact a 401(k) expert at 800-472-0646.

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Nov 01

New 2017 Solo 401(k) Plan Contribution Limits Expected To Increase Demand for Self-Directed Solo 401(k) Plan

Increase Solo 401(k) Contribution Limit to $54,000 and $60,000, if over the age of 50, for 2017 offers exciting retirement benefits for the self-employed

IRA Financial Group, the leading provider of self-directed solo 401(k) plans, is proud to announce 2017 new contribution limits released by the IRS for IRA and 401(k) plans. Under the 2017 Solo 401k contribution limits, if under the age of fifty, Solo 401(k) plan employee deferrals will remain the same as 2016, but profit sharing contributions would go from $35000 to $36000 for a Total of $54,000 for 2017. Whereas, if over the age of fifty, Solo 401(k) plan employee deferral contributions would stay at $24,000 whereby employer profit sharing contributions would go from $35,000 to $36,000 for a Total of $60,000 for 2017. “The IRS has increased the limitation for defined contribution plans under Section 415(c)(1)(A) for 2017 from $53,000 to $54,000 and from $59,000 to $60,000, if over the age of 50″, stated Adam Bergman, a partner with the IRA Financial Group.

New 2017 Solo 401(k) Plan Contribution Limits Expected To Increase Demand for Self-Directed Solo 401(k) PlanThe solo 401(k) Plan, also known as the individual 401(k) Plan or self-directed 401(k), is an IRS approved qualified retirement plan that was created specifically for the self-employed. The IRS created the solo 401k Plan to be a cost effective retirement solution for the self-employed or a business owner with no employees. A solo 401K is perfect for sole proprietors, small businesses and independent contractors such as consultants. A solo 401k plan offers the same advantages as a self-directed IRA, but without having to hire a special custodian or create an LLC. A solo 401(k) plan can be adopted by any business type, including a sole proprietorship, Corporation, LLC, or partnership. With IRA Financial Group’s IRS approved solo 401(k) plan, as trustee of the solo 401(k) plan, the plan participant has the ability to make investment decisions on behalf of the plan without seeking the consent of the custodian.

“The beauty of IRA Financial Group’s IRS approved self-directed Solo 401(k) plan is that is a trustee directed checkbook control plan that can be opened at most local banks and major financial institutions allowing one to make traditional or alternative asset investments, make high contributions in pre-tax, after-tax, or Roth, benefit from the loan feature, while not having to incur any account value, transaction or termination fees,” 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 leading provider of Solo 401(k) Plan 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 and private business investments 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.

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Sep 19

Will an Individual 401(k) Benefit You?

The Individual 401(k), also known as a  Solo 401(k) plan, is unique and so popular because it is designed explicitly for small, owner only business. It’s a tax efficient and cost effective plan that offers all the benefits of a Self Directed IRA plan, and includes additional benefits, such as high contribution limits (up to $59,000) and a $50,000 loan feature. There are many features of the Solo 401(k) plan that make it so appealing and popular among self employed business owners. A Solo 401(k) Plan is typically used by owner owned business for the following purposes:

  • High Contribution Limits: Under the 2016 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.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 $59,000.
  • Loan Feature: While an IRA offers no participant loan feature, the Solo 401k allows participants to borrow up to $50,000 or 50% of their account value (whichever is less) for any purpose.
  • Finance a Business or investment: Borrow up to $50,000 to finance a business or make an investment.
  • Flexible Investment Options: You can invest in almost any type of investment, including real estate, private business entities and commercial paper and channel the gains back into your 401(k) tax free.
  • Roth Type Contributions: With IRAs, those who earn high incomes are disallowed from contributing to a Roth IRA or converting their IRA to a Roth IRA. The Solo 401(k) plan contains a built in Roth sub-account which can be contributed to without any income restrictions.
  • Cost Effective Administration: In general, the Solo 401(k) plan is easy to operate. 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).
  • Exemption from UDFI: 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.

Retirement Saving Consolidation Through Rollovers

A Solo 401(k) plan can accept rollovers of funds from another retirement savings vehicle, such as an IRA, a SEP, or a previous employer’s 401(k) plan.

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