Jan 08

How to Establish a Self-Directed 401(k) with Wells Fargo

IRA Financial Group, the leading provider of Self-Directed 401(k) Plans, and Wells Fargo have worked together to allow IRA Financial Group Solo 401(k) clients to establish a Checkbook Control Solo 401(k) Plan account with Wells Fargo with no custodian fees.

IRA Financial Group clients will be able to use IRA Financial Group’s IRS approved Self-Directed 401(k) Plan and open the plan account at Wells Fargo, as well as other partners, such as Charles Schwab, Fidelity, and E-Trade. With IRA Financial Group’s Self-Directed Solo 401(k) Plan at Wells Fargo, you will be able to make traditional investments, such as stocks, as well as alternative asset investments, such as real estate, precious metals, hard money loans, tax liens, private business investments, and much more and incur NO custodian fees. IRA Financial Group’s IRS approved Solo 401(k) Plan is an open architecture trustee directed plan allowing you, as the trustee of the plan, to have Checkbook Control over your plan funds directly from your Wells Fargo account and incur no custodian fees.

How to Establish a Self-Directed 401(k) with Wells Fargo

The IRA Financial Group Difference

By working with IRA Financial Group to establish your Self-Directed 401(k) Plan, you will gain the ability to make high annual 401(k) plan contributions, up to $55,000 ($61,000 if over the age of 50) in pre-tax, Roth, or after-tax, have a loan option, and gain the ability to make traditional as well as alternative asset investments, such as real estate. Whereas, if you adopted a Solo 401(k) Plan sponsored by Wells Fargo you would only be able to make pre-tax contributions, no Roth or after-tax contribution option, there would be no loan feature, and you would be only allowed to make traditional investments offered by Wells Fargo, such as mutual funds, and no real estate or other alternative asset investments would be permitted. So how is this possible?

With a Solo 401(k) Plan, the plan documents set forth the rules governing your Solo 401(k) Plan. IRA Financial Group’s Solo 401(k) Plan documents are open architecture trustee directed and not custodian directed giving you, as the trustee of the plan, Checkbook Control over the plan and its assets. IRA Financial Group would be the Solo 401(k) Plan document sponsor and Wells Fargo would be your 401(k) plan custodian, giving you the power to have Checkbook Control over your plan assets and make traditional as well as alternative asset investments. Using IRA Financial Group’s plan documents will allow you to take advantage of a special type of non-prototype plan account offered by Wells Fargo.

Unlike an IRA where the IRA custodian has specific IRS reporting requirements, with a 401(k) plan the custodian (Wells Fargo) has no IRS reporting requirements, since you as the plan administrator would be responsible for any IRS reporting, such as filing the IRS Form 5500-EZ (if your plan assets are greater than $250,000). This is the reason Wells Fargo will allow you to open your Solo 401(k) Plan account with them and make alternative asset investments using a special type of non-prototype account and not with an IRA, since the 401(k) plan custodian would have no IRS reporting requirements with a trustee directed Solo 401(k) Plan using IRA Financial Group plan documents.

IRA Financial Group has developed a relationship with Wells Fargo in order to allow you to open a Self-Directed Checkbook Control Solo 401(k) Plan with no custodian fees. Your IRA Financial Group assigned retirement tax specialist will assist you in opening your new Self-Directed 401(k) Plan at Wells Fargo or any other financial institution of your choice quickly. Using IRA Financial Group’s plan documents will allow you to take advantage of a special type of non-prototype 401(k) plan account offered by Wells Fargo allowing you to make traditional as well as alternative asset investments, such as real estate, as the trustee of the plan – with full Checkbook Control. The process for establishing a Self-Directed Solo 401(k) Plan with IRA Financial Group and Wells Fargo can be completed in days:

  1.  Complete a short New Client Intake Form allowing us to customize your IRS approved Self-Directed Solo 401(k) Plan to satisfy your retirement, investment, and tax needs.
  2. Within 24 hours, your customized Self-Directed Solo 401(k) Plan will be drafted and sent to you for your review.
  3. Your assigned retirement tax specialist will review the plan documents with you.
  4. We will assist you in establishing your Self-Directed Solo 401(k) Plan with Wells Fargo or any other financial institution of your choice. In addition to Wells Fargo, IRA Financial Group has a relationship with Charles Schwab, Fidelity, and E-Trade.
  5. Once your new Self-Directed Solo 401(k) Plan has been opened, we will assist you in making a contribution or rolling over existing retirement funds into the plan.
  6. You are ready to take advantage of all the benefits your Self-Directed Solo 401(k) Plan has to offer, including making high annual contributions in pre-tax, Roth, or after-tax, borrowing up to $50,000, and making traditional as well as alternative asset investments, such as real estate, by simply writing a check or sending a wire from your new plan account.

See the many advantages of establishing a Self-Directed 401(k) Plan with IRA Financial Group and Wells Fargo.

High Annual Contribution Limits

While an IRA only allows a $5,500 contribution limit (with a $1,000 additional “catch up” contribution for those over age 50), the Solo 401(k) annual contribution limit is $55,000 for 2018 with an additional $6,000 catch-up contribution for those over age 50. In addition, if your spouse generates compensation from the business, he or she can also make high contributions to the plan.

Under the 2018 Solo 401(k) contribution rules, a plan participant under the age of 50 can make a maximum employee deferral contribution in the amount of $18,500. 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 $55,000.

For plan participants over the age of 50, an individual can make a maximum employee deferral contribution in the amount of $24,500. 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 $61,000.

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

A World of Investment Opportunities

By establishing a Solo 401(k) Plan with IRA Financial Group and opening the plan account with Wells Fargo, 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; your only limit is your imagination. The income and gains from these investments will flow back into your Solo 401(k) Plan tax-free. Making an investment with your Solo 401(k) Plan is as simple as writing a check. As trustee of the Solo 401(k) Plan, you will have total control over your retirement assets to make real estate and other investments tax-free and without custodian consent.

Loan Feature

While an IRA offers no participant loan feature, by establishing a Solo 401(k) Plan with IRA Financial Group and opening the plan account with Wells Fargo, you will gain the ability to borrow up to $50,000 or 50% of the account value (whichever is less) for any purpose at a low interest rate (the lowest interest rate is Prime which is 4.50% as of 12/14/17). This offers a Solo 401(k) Plan participant the ability to access up to $50,000 for use for any purpose, including paying personal debt or funding a business.

“Checkbook Control” and No Custodian Fees

By establishing a Solo 401(k) Plan with IRA Financial Group and opening the plan account with Wells Fargo, you can serve as trustee of the plan giving you “Checkbook Control” over the plan’s funds. To this end, making an investment with your Solo 401(k) Plan is as easy as writing a check. Another significant 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 401k 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. Also, because the Solo 401(k) Plan trust account can be opened at any local bank or credit union (i.e., Chase, Wells Fargo, Citibank, etc.), you will not be required to pay custodian fees for the account as you would in the case of an IRA.

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. By establishing a Solo 401(k) Plan with IRA Financial Group and opening the plan account with Wells Fargo, your Solo 401(k) Plan contains a built-in Roth sub-account which can be contributed to without any income restrictions. With a Roth Solo 401(k) sub-account, you can make Roth type contributions while having the ability to make significantly greater contributions than with an IRA.

After-Tax Contributions

By establishing a Solo 401(k) Plan with IRA Financial Group and opening the plan account with Wells Fargo, you will be able to make after-tax contributions up to $55,000 (or $61,000 if over the age of 50). Unlike pre-tax employee deferral contributions, after-tax contributions can be made on a dollar-dollar basis and can be immediately converted to Roth without tax.

Cost Effective Administration

In general, the Solo 401(k) Plan is easy to operate. By establishing a Solo 401(k) Plan with IRA Financial Group and opening the plan account with Wells Fargo, 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 2018. But, with a Solo 401(k) Plan, you can use leverage without being subject to the UDFI rules and UBTI tax. By establishing a Solo 401(k) Plan with IRA Financial Group and opening the plan account with Wells Fargo, you can buy real estate and use a nonrecourse loan without triggering the UBTI tax. This exemption provides significant tax advantages for using a Solo 401(k) Plan versus an IRA to purchase real estate.

Work with the Leaders

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* Self-Directed IRA and Solo 401K Plan provider. We have helped over 15,500 clients establish IRS compliant Self-Directed IRA and Solo 401k Plans and invest over $4.9 billion in alternative assets, such as real estate.

If you would like to learn more about establishing a Self-Directed 401(k) Plan with IRA Financial Group and opening your plan account with Wells Fargo, please contact a Solo 401(k) Plan specialist at 800-472-0646.

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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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Mar 02

Do All Solo 401k Plans Offer the Same Benefits?

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

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

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

High Contributions: Like all Solo 401K Plans, for 2017, IRA Financial Group’s Solo 401(k) Plan will allow a plan participant to make annual contributions up to $54,000 annually with an additional $6,000 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.

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

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

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

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

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

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

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

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Jan 17

If You Have Self-Employment Income, You Need a Solo 401k Plan

401k plans are defined in the Internal Revenue Code (Section 401) as retirement savings trusts. A 401(k) Plan is an IRS approved qualified retirement plan. As the name implies, the Solo 401(k) plan is an IRS approved qualified 401(k) plan designed for a self-employed individual or the sole owner-employee of a corporation. It works best when there are no other employees or a very small number of employees.

In 2001, the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) was passed. This act clarified how a 401(k) could be used by a self employed person who has no full time employees. It also clarified that the self-employed 401(k) participant can make contributions as the role of employee and employer resulting in very high contribution limits.

To access these benefits an investor must meet two eligibility requirements:

1. The presence of self employment activity.

2. The absence of full-time employees.

A Solo 401(k) offers a self-employed business owner the ability to use his or her retirement funds to make virtually any type of investment on their own without requiring the consent of a custodian. The IRS only describes the type of investments that are prohibited, which are very few. In addition, a Solo 401(k) plan offers a high annual contribution limit (up to $60,000), allows you to borrow up to $50,000 for any purpose, and imposes no custodian fees.

The Advantages of Using a Solo 401(k)?

The Solo 401(k) plan offers most of the characteristics of the Self Directed IRA LLC, including having the ability to make almost any type of investments, including real estate, but without the need to establish an LLC or pay custodian fees.  The Solo 401(k) Plan is the most tax-advantageous retirement plan available because of its very high annual contribution limits. The Solo 401K plan also allows you to borrow money from your retirement funds (up to $50,000) and use the funds for any purpose, including help finance your business or pay personal bills.

Am I Eligible to use the Solo 401K Plan?

The Solo 401(k) plan may be used by any individual who is already a business owner or who will be establishing a business and does not have, or plan to have, full-time employees. The Solo 401(k) plan is perfect for independent contractors, such as consultants, home businesses and real estate agents. The owner’s spouse may also contribute to the plan as long as he or she is an employee of the business.

Use the Solo 401K Plan to Take out a Loan

One of the advantages of the Solo 401K plan is that it allows you to take out a loan from your retirement account. Under Internal Revenue Code Section 72(p), a Solo 401(k) Plan participant is permitted to borrow up to 50% of the total 401(k) value or $50,000 whichever is less tax-free for any reason. Repayment of the loan is based on a schedule provided when the loan is initiated and must be paid back into the account (including interest) over a term of up to five years. Loan payments must be made at least quarterly and at a minimum interest rate of Prime (as of 1/1/17, the Prime interest rate as per the Wall Street Journal is 3.75%). Failure to make the loan payments may cause a loan default causing taxes and IRS penalties.

For Real Estate Investors

Like the Self-Directed IRA LLC structure, the Solo 401K Plan offers participants the ability to invest in real estate tax-free! All income and gains generated by the investment will flow back to the 401(k) Plan tax-free!

In addition, in the case of an IRA using nonrecourse debt to finance a real estate purchase (only nonrecourse debt is permitted as recourse debt associated with an IRA investment would trigger a prohibited transaction), income or gains generally from the investment would trigger a penalty tax called the Unrelated Debt Financed Income (UDFI) tax. UDFI is a type of unrelated business taxable income which if triggered could subject the IRA to close to a 40% tax for 2017. However, a 401(k) Plan using nonrecourse financing for a real estate investment is exempt from the UDFI tax (Internal Revenue Code Section 514(c)(9).

How do I Initially fund the Solo 401K Plan?

Like the Self-Directed IRA LLC, to initially fund the Solo 401(k) you may rollover funds from Traditional IRAs, SEP Plans, previous employer 401(k) plans, Money Purchase plans, Profit Sharing plans, Keogh plans, Defined Benefit plans, 403(b) plans and Rollover IRAs tax-free! This is accomplished by setting up a Trust account for the Solo 401(k) and directly transferring the funds from the current Custodian to the trust bank account. The trust account can be opened at any local bank or credit union.

How much Money Can I Contribute to the Solo 401K 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.

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

The Trustee

For a Solo 401K plan, a Trustee must be designated to hold the assets of the retirement plan. In the case of the Solo 401(k), you are able to act as your own Trustee and are responsible for investing trust assets prudently and productively. In other words, as Trustee of the 401(k) Plan, you will have “Checkbook Control” over the Plan assets allowing you to make investments by simply writing a check from your 401(k) Trust account. As a result, the Solo 401(k) Plan is perfect for making real estate or tax lien investments. Note – The Trustee is prohibited from benefiting directly from the trust and cannot co-mingle personal funds with the trust or enter into a transaction with the trust.

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

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Oct 07

The IRA Financial Group 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.

The “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 $59,000) 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: 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, of $53,000.

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 $59,000.

Calculate Your Solo 401k Plan Maximum Contribution Limit Please click here to calculate 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 $53,000 if under the age of 50 and $59,000 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.

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Oct 03

What is a Self-Directed 401(k) Plan?

A Solo 401(k) 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 $53,000 for plan participants under the age of 50 and $59,000 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 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, of $53,000.

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 $59,000.

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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Sep 20

Establishing a Solo 401(k) with Fidelity

IRA Financial Group, the leading provider of Self-Directed Solo 401(k) Plans, and Fidelity have worked together to allow IRA Financial Group Solo 401(k) clients to establish a Checkbook Control Solo 401(k) Plan account with Fidelity with no custodian fees.

IRA Financial Group clients will be able to use IRA Financial Group’s IRS approved Self-Directed Solo 401(k) Plan and open the plan account at Fidelity, as well as other partners, such as Charles Schwab, E-Trade, and Wells Fargo. With IRA Financial Group’s Self-Directed Solo 401(k) Plan at Fidelity, you will be able to make traditional investments, such as stocks, as well as alternative asset investments, such as real estate, precious metals, hard money loans, tax liens, private business investments, and much more and incur NO custodian fees. IRA Financial Group’s IRS approved Solo 401(k) Plan is an open architecture trustee directed plan allowing you, as the trustee of the plan, to have Checkbook Control over your plan funds directly from your Fidelity account and incur no custodian fees.

The IRA Financial Group Difference

By working with IRA Financial Group to establish your Self-Directed Solo 401(k) Plan, you will gain the ability to make high annual 401(k) plan contributions, up to $53,000 ($59,000 if over the age of 50) in pre-tax, Roth, or after-tax, have a loan option, and gain the ability to make traditional as well as alternative asset investments, such as real estate. Whereas, if you adopted a Solo 401(k) Plan sponsored by Fidelity you would only be able to make pre-tax contributions, no Roth or after-tax contribution option, there would be no loan feature, and you would be only allowed to make traditional investments offered by Fidelity, such as mutual funds, and no real estate or other alternative asset investments would be permitted. So how is this possible?

With a Solo 401(k) Plan, the plan documents set forth the rules governing your Solo 401(k) Plan. IRA Financial Group’s Solo 401(k) Plan documents are open architecture trustee directed and not custodian directed giving you, as the trustee of the plan, Checkbook Control over the plan and its assets. IRA Financial Group would be the Solo 401(k) Plan document sponsor and Fidelity would be your 401(k) plan custodian, giving you the power to have Checkbook Control over your plan assets and make traditional as well as alternative asset investments. Using IRA Financial Group’s plan documents will allow you to take advantage of a special type of non-prototype plan account offered by Fidelity.

Unlike an IRA where the IRA custodian has specific IRS reporting requirements, with a 401(k) plan the custodian (Fidelity) has no IRS reporting requirements, since you as the plan administrator would be responsible for any IRS reporting, such as filing the IRS Form 5500-EZ (if your plan assets are greater than $250,000). This is the reason Fidelity will allow you to open your Solo 401(k) Plan account with them and make alternative asset investments using a special type of non-prototype account and not with an IRA, since the 401(k) plan custodian would have no IRS reporting requirements with a trustee directed Solo 401(k) Plan using IRA Financial Group plan documents.

IRA Financial Group has developed a relationship with Fidelity in order to allow you to open a Self-Directed Checkbook Control Solo 401(k) Plan with no custodian fees. Your IRA Financial Group assigned retirement tax specialist will assist you in opening your new Self-Directed Solo 401(k) Plan at Fidelity or any other financial institution of your choice quickly. Using IRA Financial Group’s plan documents will allow you to take advantage of a special type of non-prototype 401(k) plan account offered by Fidelity allowing you to make traditional as well as alternative asset investments, such as real estate, as the trustee of the plan – with full Checkbook Control. The process for establishing a Self-Directed Solo 401(k) Plan with IRA Financial Group and Fidelity can be completed in days:

  1. 1. Complete a short New Client Intake Form allowing us to customize your IRS approved Self-Directed Solo 401(k) Plan to satisfy your retirement, investment, and tax needs.
  2. 2. Within 24 hours, your customized Self-Directed Solo 401(k) Plan will be drafted and sent to you for your review.
  3. 3. Your assigned retirement tax specialist will review the plan documents with you.
  4. 4. We will assist you in establishing your Self-Directed Solo 401(k) Plan with Fidelity or any other financial institution of your choice. In addition to Fidelity, IRA Financial Group has a relationship with Charles Schwab, E-trade, and Wells Fargo.
  5. 5. Once your new Self-Directed Solo 401(k) Plan has been opened, we will assist you in making a contribution or rolling over existing retirement funds into the plan.
  6. 6. You are ready to take advantage of all the benefits your Self-Directed Solo 401(k) Plan has to offer, including making high annual contributions in pre-tax, Roth, or after-tax, borrowing up to $50,000, and making traditional as well as alternative asset investments, such as real estate, by simply writing a check or sending a wire from your new plan account.

See the many advantages of establishing a Self-Directed Solo 401(k) Plan with IRA Financial Group and Fidelity.

High Annual Contribution Limits

While an IRA only allows a $5,500 contribution limit (with a $1,000 additional “catch up” contribution for those over age 50), the Solo 401(k) annual contribution limit is $53,000 for 2016 with an additional $6,000 catch-up contribution for those over age 50. In addition, if your spouse generates compensation from the business, he or she can also make high contributions to the plan.

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, of $53,000.

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 $59,000.

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

A World of Investment Opportunities

By establishing a Solo 401(k) Plan with IRA Financial Group and opening the plan account with Fidelity, 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; your only limit is your imagination. The income and gains from these investments will flow back into your Solo 401(k) Plan tax-free. Making an investment with your Solo 401(k) Plan is as simple as writing a check. As trustee of the Solo 401(k) Plan, you will have total control over your retirement assets to make real estate and other investments tax-free and without custodian consent.

Loan Feature

While an IRA offers no participant loan feature, by establishing a Solo 401(k) Plan with IRA Financial Group and opening the plan account with Fidelity, you will gain the ability to borrow up to $50,000 or 50% of the account value (whichever is less) for any purpose at a low interest rate (the lowest interest rate is Prime which is 3.50% as of 12/21/15). This offers a Solo 401(k) Plan participant the ability to access up to $50,000 for use for any purpose, including paying personal debt or funding a business.

“Checkbook Control” and No Custodian Fees

By establishing a Solo 401(k) Plan with IRA Financial Group and opening the plan account with Fidelity, you can serve as trustee of the plan giving you “Checkbook Control” over the plan’s funds. To this end, making an investment with your Solo 401(k) Plan is as easy as writing a check. Another significant 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 401k 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. Also, because the Solo 401(k) Plan trust account can be opened at any local bank or credit union (i.e., Chase, Wells Fargo, Citibank, etc.), you will not be required to pay custodian fees for the account as you would in the case of an IRA.

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. By establishing a Solo 401(k) Plan with IRA Financial Group and opening the plan account with Fidelity, your Solo 401(k) Plan contains a built-in Roth sub-account which can be contributed to without any income restrictions. With a Roth Solo 401(k) sub-account, you can make Roth type contributions while having the ability to make significantly greater contributions than with an IRA.

After-Tax Contributions

By establishing a Solo 401(k) Plan with IRA Financial Group and opening the plan account with Fidelity, you will be able to make after-tax contributions up to $53,000 (or $59,000 if over the age of 50). Unlike pre-tax employee deferral contributions, after-tax contributions can be made on a dollar-dollar basis and can be immediately converted to Roth without tax.

Cost Effective Administration

In general, the Solo 401(k) Plan is easy to operate. By establishing a Solo 401(k) Plan with IRA Financial Group and opening the plan account with Fidelity, 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 2016. But, with a Solo 401(k) Plan, you can use leverage without being subject to the UDFI rules and UBTI tax. By establishing a Solo 401(k) Plan with IRA Financial Group and opening the plan account with Fidelity, you can buy real estate and use a nonrecourse loan without triggering the UBTI tax. This exemption provides significant tax advantages for using a Solo 401(k) Plan versus an IRA to purchase real estate.

Work with the Leaders

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* Self-Directed IRA and Solo 401K Plan provider. We have helped over 12,000 clients establish IRS compliant Self-Directed IRA and Solo 401k Plans and invest over $3.8 billion in alternative assets, such as real estate.

IRA Financial Group proudly announces the latest book titled “The Checkbook IRA – Why You Want It, Why You Need It,” written by tax partner Adam Bergman, which is now available on Amazon. This is the second book in a four-part series on self-directed retirement plans. The first book, “Going Solo,” is also available on Amazon.

If you would like to learn more about establishing a Self-Directed Solo 401(k) Plan with IRA Financial Group and opening your plan account with Fidelity, please contact a Solo 401(k) Plan specialist at 800-472-0646.

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Feb 05

Advantages of a ‘True’ Solo 401(k) 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.

The “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 $59,000) 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: 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, of $53,000.

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 $59,000.

Calculate Your Solo 401k Plan Maximum Contribution Limit Please click here to calculate 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 $53,000 if under the age of 50 and $59,000 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 Solo 401(k) Experts at 800-472-0646 for more information.

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Jan 05

What Exactly is a Solo 401(k) Plan?

401k plans are defined in the Internal Revenue Code (Section 401) as retirement savings trusts. A 401(k) Plan is an IRS approved qualified retirement plan. As the name implies, the Solo 401(k) plan is an IRS approved qualified 401(k) plan designed for a self-employed individual or the sole owner-employee of a corporation. It works best when there are no other employees or a very small number of employees.

In 2001, the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) was passed. This act clarified how a 401(k) could be used by a self employed person who has no full time employees. It also clarified that the self-employed 401(k) participant can make contributions as the role of employee and employer resulting in very high contribution limits.

To access these benefits an investor must meet two eligibility requirements:

1. The presence of self employment activity.

2. The absence of full-time employees.

A Solo 401(k) offers a self-employed business owner the ability to use his or her retirement funds to make virtually any type of investment on their own without requiring the consent of a custodian. The IRS only describes the type of investments that are prohibited, which are very few. In addition, a Solo 401(k) plan offers a high annual contribution limit (up to $59,000), allows you to borrow up to $50,000 for any purpose, and imposes no custodian fees.

The Advantages of Using a Solo 401(k)?

What Exactly is a Solo 401(k) Plan?The Solo 401(k) plan offers most of the characteristics of the Self Directed IRA LLC, including having the ability to make almost any type of investments, including real estate, but without the need to establish an LLC or pay custodian fees.  The Solo 401(k) Plan is the most tax-advantageous retirement plan available because of its very high annual contribution limits. The Solo 401K plan also allows you to borrow money from your retirement funds (up to $50,000) and use the funds for any purpose, including help finance your business or pay personal bills.

Am I Eligible to use the Solo 401K Plan?

The Solo 401(k) plan may be used by any individual who is already a business owner or who will be establishing a business and does not have, or plan to have, full-time employees. The Solo 401(k) plan is perfect for independent contractors, such as consultants, home businesses and real estate agents. The owner’s spouse may also contribute to the plan as long as he or she is an employee of the business.

Use the Solo 401K Plan to Take out a Loan

One of the advantages of the Solo 401K plan is that it allows you to take out a loan from your retirement account. Under Internal Revenue Code Section 72(p), a Solo 401(k) Plan participant is permitted to borrow up to 50% of the total 401(k) value or $50,000 whichever is less tax-free for any reason. Repayment of the loan is based on a schedule provided when the loan is initiated and must be paid back into the account (including interest) over a term of up to five years. Loan payments must be made at least quarterly and at a minimum interest rate of Prime (as of 12/21/15, the Prime interest rate as per the Wall Street Journal is 3.50%). Failure to make the loan payments may cause a loan default causing taxes and IRS penalties.

For Real Estate Investors

Like the Self-Directed IRA LLC structure, the Solo 401K Plan offers participants the ability to invest in real estate tax-free! All income and gains generated by the investment will flow back to the 401(k) Plan tax-free!

In addition, in the case of an IRA using nonrecourse debt to finance a real estate purchase (only nonrecourse debt is permitted as recourse debt associated with an IRA investment would trigger a prohibited transaction), income or gains generally from the investment would trigger a penalty tax called the Unrelated Debt Financed Income (UDFI) tax. UDFI is a type of unrelated business taxable income which if triggered could subject the IRA to close to a 40% tax for 2016. However, a 401(k) Plan using nonrecourse financing for a real estate investment is exempt from the UDFI tax (Internal Revenue Code Section 514(c)(9).

How do I Initially fund the Solo 401K Plan?

Like the Self-Directed IRA LLC, to initially fund the Solo 401(k) you may rollover funds from Traditional IRAs, SEP Plans, previous employer 401(k) plans, Money Purchase plans, Profit Sharing plans, Keogh plans, Defined Benefit plans, 403(b) plans and Rollover IRAs tax-free! This is accomplished by setting up a Trust account for the Solo 401(k) and directly transferring the funds from the current Custodian to the trust bank account. The trust account can be opened at any local bank or credit union.

How much Money Can I Contribute to the Solo 401K Plan?

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, of $53,000.

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 $59,000, an increase of $1,500 from 2014.

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

The Trustee

For a Solo 401K plan, a Trustee must be designated to hold the assets of the retirement plan. In the case of the Solo 401(k), you are able to act as your own Trustee and are responsible for investing trust assets prudently and productively. In other words, as Trustee of the 401(k) Plan, you will have “Checkbook Control” over the Plan assets allowing you to make investments by simply writing a check from your 401(k) Trust account. As a result, the Solo 401(k) Plan is perfect for making real estate or tax lien investments. Note – The Trustee is prohibited from benefiting directly from the trust and cannot co-mingle personal funds with the trust or enter into a transaction with the trust.

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

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Dec 14

IRA Financial Group Introduces Advanced Solo 401(k) Annual Contribution Calculator Tool for 2015

Solo 401(k) Plan Contribution calculator will allow individuals to calculate their maximum solo 401(k) Plan annual capital contributions for 2015

IRA Financial Group, the leading provider of self-directed Solo 401(k) Plans, introduces new look online Solo 401(k) annual contribution calculator for 2015. The newly revamped online Solo 401(k) contribution calculator is a valuable tool that will allow an individual to calculate the maximum annual contribution to a solo 401(k) Plan, including employee deferrals and employer profit sharing contributions for 2015. The improved 401k online contribution calculator tool will allow a Solo 401(k) Plan participant the ability to calculate their maximum annual Solo 401(k) contribution based on ones age as well as the type of entity they have (i.e. sole proprietorship, LLC, partnership, or corporation) for the 2015 taxable year. “We are excited to introduce the newly designed Solo 401(k) Plan contribution calculator for individuals looking to determine their maximum 401(k) contribution amount for 2015,“ stated, Susan Glass, a 401(k) retirement specialist with the IRA Financial Group.

The annual Solo 401k contribution consists of two parts, an employee salary deferral contribution and an employer profit sharing contribution. In 2015 the total Solo 401(k) contribution limit is $53,000 or $59,000 if age 50 or older. The total allowable contribution limits are combined to get the maximum Solo 401k contribution limit. The Solo 401(k) contribution limit for 2016 will remain the same as 2015.

IRA Financial Group Introduces Advanced Solo 401(k) Annual Contribution Calculator Tool for 2015Up to $18,000 per year can be contributed by the participant through employee elective deferrals. An additional $6,000 can be contributed for persons over age 50. Through the role of employer, an additional contribution can be made to the plan in an amount up to 25% of the participant’s self- employment compensation (20% if one a Sole Proprietor or a Schedule C Tax Payer).

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

IRA Financial Group is the market’s leading provider of self-directed Solo 401(k) plan. 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 call 800-472-0646.

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