On this episode of Adam Talks, Adam Bergman, Esq. discusses an oversight the government missed which will allow a self-employed individual to set up a Solo 401(k) for free!
Set up a Solo 401(k) for Free!
This episode discusses a tax credit opportunity for setting up a Solo 401(k) due to a government oversight. SECURE Act 2.0 included an auto enrollment tax credit intended for businesses with employees but lacked specificity on eligibility, allowing even solo business owners to qualify. This credit provides $1,500 over three years for those setting up a Solo 401(k) in 2023 or 2024 by filing IRS Form 8881, with no requirement for non-highly compensated employees. Adam Bergman, founder of IRA Financial, highlights the value of tax credits over tax deductions, emphasizing the financial benefit of this opportunity for individuals.
Bergman explains that the auto enrollment credit, which is part of SECURE 2, is intended to encourage businesses to automatically enroll employees in a 401(k) plan. However, the lack of clear language restricting it to non-highly compensated employees has opened up the credit to solo business owners as well. This oversight allows individuals to receive a $1,500 tax credit over three years simply by setting up a Solo 401(k) and utilizing the auto enrollment feature, as outlined in Form 8881.
The uniqueness of this situation lies in the fact that Solo 401(k) plans typically do not have non-highly compensated employees, as they consist mainly of owner employees or their spouses. The speaker underscores the strategic advantage of this tax credit opportunity for solo business owners, enabling them to establish a retirement plan without incurring any setup costs. By taking advantage of this government oversight, individuals can secure their financial future through the establishment of a Solo 401(k) plan.
Furthermore, the speaker outlines the benefits of setting up a Solo K, such as the ability to contribute up to $69,000 or $76,500 for individuals over 50, potential borrowing of up to $50,000, and diverse investment options including stocks, real estate, cryptocurrencies, and private placements. The plan also offers leverage for real estate investments without tax implications and provides robust asset and credit protection for participants. This comprehensive retirement solution is hailed as ideal for self-employed individuals seeking a tax-efficient and flexible savings strategy.
In conclusion, Bergman encourages listeners to seize this opportunity presented by the government’s oversight and set up a Solo 401(k) plan to benefit from the $1,500 tax credit. By working with a knowledgeable provider like IRA Financial, individuals can navigate the process seamlessly and enjoy an additional year of consulting services. The transcript underscores the significance of this tax credit as a valuable incentive for self-employed individuals to prioritize their retirement savings and take advantage of a favorable financial opportunity provided by the IRS.
