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The True Self Employed 401(k) Plan

For over thirty years, the IRS approved Self Employed 401(k) Plan has been used by hundreds of thousands of small business. However, not all Self Employed 401(k) Plan include the same options. The extent of options available to Self Employed 401(k) Plan participants is determined based on the 401(k) Plan documents. As a result, the type of options offered in a Self Employed 401(k) plan is largely based on the institution offering the 401(k) Plan. For example, most financial institutions offering Self Employed 401(k) plans will require the plan to invest in only their financial products and will generally not permit loans. The reason for this is that the financial institutions want you to invest all of your plan funds in their financial products since this is how they generate commissions and profits. By allowing you to borrow money from your Self Employed 401(k) plan or invest in real estate, for example, there would be less money in your 401(k) plan to purchase their financial products.

The “True” Self Employed 401(k) Plan offered by the IRA Financial Group offers self employed business owner the ability to their 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 Self Employed 401K Plan will allow you to make high contribution limits (up to $62,000 for 2019) as well as borrow up to $50,000 for any purpose.

The True Self Employed 401k Plan Advantages

The “True “Self Employed 401(k) plan is so popular because it is designed explicitly for small, owner only business that want control over their retirement funds. There are many features of our “True” Self Employed 401(k) plan that make it so appealing and popular among self -employed business owners.

High Contribution Limits: With the “True” Self Employed 401(k) Plan, a plan participant of a Self Employed 401K Plan can make annual contributions up to $56,000 annually with an additional $6,000 catch up contribution for those over age 50.

Under the 2019 Solo 401(k) contribution rules, a plan participant under the age of 50 can make a maximum employee deferral contribution in the amount of $19,000. That amount can be made in pre-tax or after-tax (Roth). On the profit sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single member LLC) profit sharing contribution up to a combined maximum, including the employee deferral, of $56,000, $1,000 more than 2016.

For plan participants over the age of 50, an individual can make a maximum employee deferral contribution in the amount of $25,000. 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 $62,000.

Loan Feature: With the “True” Self Employed 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 popular aspect of the “True” Self Employed 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 Self Employed 401k participant. A “True” Self Employed 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 Self Employed 401K Plan investment is as simple as writing a check.

Flexible Contribution Options: With the “True” Self Employed 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” Self Employed 401(k) plan contains a built in Roth sub-account which can be contributed to without any income restrictions.

Cost Effective Administration: The “Tue” Self Employed 401(k) Plan is easy to operate and effortless to administer. There is generally no annual filing requirement unless your Self Employed 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” Self Employed 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 Self Employed 401(k) Plan

IRA Financial Group “True” Self Employed 401(k) Plan

High Contribution Limits (up to $56,000 if under the age of 50 and $62,000 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

No

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

No

Yes

Unlimited Investment Options

No

Yes

“Checkbook Control”

No

Yes

Roth subaccount

Yes

Yes

Roth conversion feature

No

Yes

Direct Access to your Retirement Funds

No

Yes

Serve as trustee of your Self Employed 401k) Plan

Yes

Yes

Unlimited bankruptcy protection

Yes

Yes

 

To learn more about the Self Employed 401(k) Plan structure, contact one of our 401(k) Experts at 800-IRA-0646 today!