Not all Solo 401(k) plans are the same and this is primarily dependent upon the custodian you choose to establish your plan and the features you will receive.
Retirement Plan for Self-Employed and Small Business Owners
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 full-time 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 401(k) Plans, often called Individual 401(k) 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.
Not All Solo 401(k) Plans are the Same
IRA Financial’s Solo 401(k) plan is unique and so popular because it is designed explicitly for small, owner-only business. There are many features of the IRA Financial’s Solo 401(k) plan that make it so appealing for small business owners.
Solo 401(k) Plans Offer Higher contributions
Like all Solo 401(k) Plans, for 2023, IRA Financial’s Solo 401(k) Plan will allow a plan participant to make annual contributions up to $66,000 annually with an additional $7,500 catch-up contribution for those at least age 50. The high contribution feature is one of the reasons a Solo 401(k) Plan is the most popular retirement vehicle for the self-employed.
Tax and penalty free loan
Unlike most Solo 401(k) Plans offered by the traditional financial institutions such as Fidelity, IRA Financial’s Solo 401(k) 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).
The most attractive feature of the IRA Financial Solo 401(k) Plan is that it offers the plan participant checkbook control over his or her retirement funds. In the case of a conventional Solo 401(k) 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 401(k) Plan account is required to be opened at the financial institution. With IRA Financial’s Solo 401(k) Plan, the plan account can be opened at any local bank, including Chase, Wells Fargo, and even Fidelity.
In addition, with IRA Financial’s Solo 401(k) 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’s Solo 401(k) Plan, the Plan participant has the freedom to make the investments he or she wants while at the same time opening the 401(k) account at any local bank. As trustee of the plan, the Plan Participant (you) can serve as the trustee providing you checkbook control over your retirement funds. With IRA Financial’s Solo 401(k) Plan, making a Solo 401(k) Plan investment is as simple as writing a check.
Roth Contributions and Conversions
Unlike a conventional Solo 401(k) Plan offered by most financial institutions, IRA Financial’s Solo 401(k) Plan contains a built in Roth sub-account which can be contributed to without any income restrictions. In addition, the IRA Financial’s Solo 401(k) Plan allows for the conversion of a traditional 401(k) or 403(b) account to a Roth sub-account. However, the Solo 401(k) 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 IRA Financial will help you take advantage of the available business tax deduction for adopting a Solo 401(k) Plan.
Solo 401(k) Plans Offer Easy administration
Like all Solo 401(k) Plans, IRA Financial’s Solo 401(k) Plan offers cheap and easy administration. 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). However, unlike a financial institution, the tax professionals at IRA Financial will assist you in completing this form is required. Get started by contacting us directly at 800-472-1043.