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How to Choose the Best Solo 401(k) Provider

How to Choose the Best Solo 401(k) Provider

When it comes to choosing the best Solo 401k provider, not all companies are the same. In a perfect world, all providers would offer all the same benefits at the same cost. However, in the real world, that’s just not the case. While many companies offer Solo 401(k) plans, not all of them are created equal. Here at IRA Financial, we feel we’re the best Solo 401(k) provider and offer everything you could possibly need at a reasonable cost. In the following, we’ll talk about all the options to look for in a Solo 401(k) provider, including cost, investment opportunities, Roth and loan options, and checkbook control. Read on to see why IRA Financial is the best Solo 401(k) provider for you!

What is a Solo 401(k) Plan?

Let’s take a minute to familiarize everyone about just what a Solo 401(k) plan is. It’s a traditional 401(k) that’s tailored for the self-employed individual or owner-only business operators. Basically, if you work for yourself in some capacity, you can open a Solo 401(k) plan, also referred to as an Individual 401(k) or Self-Employed 401(k). A Solo 401(k) offers high contribution limits of $61,000 for 2022 ($67,500 if you are age 50+) annually, which makes it better than other self-employed plans. You can invest in anything not disallowed by the IRS, such as many collectibles and life insurance. If the provider allows for it, you can also borrow money from the plan or make designated Roth contributions.

Now that you know what a Solo 401(k) plan is and who can open one, let’s talk about the benefits of it.

Related: Tips for Making 401(k) Investments

How to Choose the Best Solo 401(k) Provider

Identify Investment Options

Not all Solo 401(k) plans are the same. Most plans from banks or financial institutions are not self-directed. In other words, these companies will restrict you from making alternative asset investments. Your our only option will be traditional investments that you may not understand, like stocks, bonds and mutual funds. When you adopt a Solo 401(k), it’s important that your plan offers all the IRS options available for qualified retirement plans. This includes the ability to make non-traditional investments, like real-estate, precious metals and cryptocurrency

Determine if the Provider Offers a Roth Solo 401(k)

Another popular option for our clients is the Roth Solo 401(k) plan. For those that don’t know what a Roth is, it’s a 401(k) that allows for after-tax contributions. The major benefit is that all qualified withdrawals are tax-free! Akin to the ever-popular Roth IRA, a Roth 401(k) does not provide an immediate tax break. You fund it with after-tax dollars, but so long as the account has been open for at least five years and you are at least age 59 1/2, your distributions are both tax- and penalty-free.
One other advantage of a Roth Solo 401(k) is the ability to skirt the Required Minimum Distributions (RMD) rules. Unlike a Roth IRA, you must take RMDs from a Roth 401(k) plan starting at age 70 1/2. To avoid having to take these distributions, you may roll over your Roth 401(k) into a Roth IRA. That way, you can leave your entire balance to your beneficiaries if you don’t need the money yourself.

Ensure Your Solo 401(k) Professional Understands Tax Laws

There are several companies that advertise themselves to be the best Solo 401k providers. Yet in most cases, the people who draft your Plan documents and offer advise aren’t tax attorneys or even tax professionals.
This is why it’s important to look for an experienced tax and ERISA professional as your Solo 401(k) plan provider. This helps to ensure that your individual 401(k) plan will be properly set-up. Additionally, it ensures that the Plan remains in full IRS compliance.
The Solo 401(k) Plan is based on rules found in the Internal Revenue Code (IRC). Oftentimes, the IRC rules can be complex to a non-tax attorney. Therefore, it’s advisable to work with a Solo 401(k) Plan provider, like IRA Financial Group to establish your IRS approved Solo 401(k) plan.
When you rely on the advice of a document processor or non tax-professional, this can place your retirement future at risk. Oftentimes, plan participants have unknowingly violated IRS rules, such as the Prohibited Transactions, when operating their Plan. This is because an unqualified plan provider representative gave inaccurate tax advice or drafted the plan documents incorrectly.
Don’t let this happen to you. Work with the best Solo 401(k) plan tax & ERISA professionals. This will be a team that has specific training on the special tax aspects of the Plan. They will properly establish and maintain your plan according to IRS rules and regulations.

Determine if Your Solo 401(k) Provider Offers a Solo 401(k) Loan

Ever been in a tight jam and needed money right away? Maybe you needed start-up capital for a new business. How about that dream vacation or new car? While we don’t recommend using retirement funds for that last suggestion, but it might make sense to utilize a Solo 401(k) loan for the others. If your provider offers a loan option, like IRA Financial does, you can borrow money from your Solo 401(k). You can take out a 401(k) loan at any time and for any reason (might be limited by your provider). The maximum amount you may borrow is the lesser of $50,000 or one half of your balance.
A few benefits of a Solo 401(k) loan are there is no credit check required, faster turnaround time than a bank loan and the interest get paid back to your plan. It’s not usually ideal to take funds from your 401(k), however the option is there if you need it. The most popular investment that’s made with a 401(k) loan is new business financing.
Learn More: Solo 401(k) Loan
*You must pay the loan back over a five-year period at least quarterly at the minimum prime interest rate. However, you do have the option of selecting a higher interest rate.

Identify Whether the Provider will Give You Ongoing Support

After you establish your Solo 401(k) plan, that doesn’t mean you no longer need ongoing tax and ERISA support. As you begin administering your plan, whether it involves employee deferrals or profit sharing contributions, you should have the ability to consult with a tax professional. However, many Solo 401(k) plan providers are nowhere to be found after the plan has been established. The ongoing maintenance of the Solo 401(k) plan is a crucial element to ensure your individual retirement plan remains IRS compliant. Our tax professionals are fully trained on the special tax aspects of Solo 401(k) plans and are on-site to keep it in full IRS compliance.

Determine if the Solo 401(k) Provider allows you to have Checkbook Control

Solo 401(k) plan providers may require that you hold the plan assets at their institution. With IRA Financial Group’s Self-Directed 401(k) plan, you can hold the plan assets at the bank of your choosing and gain “checkbook control” over the retirement funds.
Earlier we talked about the ability to invest in alternate assets, such as real estate. While the best Solo 401(k) providers offer this ability, not all of them give you the freedom to invest when you want. Other providers offer “custodial-controlled” Solo 401(k) plans. With these types of plans, you have to ask permission to make your investment. This can be a long process since providers generally run a 9-5 weekday only operation. But what if you find an investment off-hours? Well, with those providers, you’ll have to wait and might lose out on an investment opportunity. However, IRA Financial offers you freedom with “checkbook control”. This allows you to attach a checkbook account (debit card, wire transfer, etc.) to your Solo 401(k) plan. Now, you can make any investment you want, anytime you want, just by writing a check. No need to wait for permission from your plan provider. This is what a true Self-Directed Solo 401(k) plan is.

Ensure the Solo 401(k) Provider Does Not Outsource Their Plan Maintenance

Most Plan providers do not assist or offer advice with respect to the maintenance and administration of a Solo 401(k) plan. This includes the completion of the IRS Form 5500-EZ. They generally refer all questions to an outside tax attorney or accountant.
IRA Financial Group offers all of its Solo 401(k) plan clients direct access to its in-house retirement tax professionals regarding maintenance or administrative questions concerning the plan.
Whether it’s answering a question about a plan feature, investment, an update in the law, or help completing the IRS Form 5500-EZ, you will work one-on-one with a retirement tax professional who are familiar with your plan and retirement goals.

Ensure you can talk Directly to a Solo 401(k) Plan Tax Professional

Oftentimes, a salesperson or representative of a Solo 401(k) plan provider will offer you tax or ERISA guidance with respect to a 401(k)-plan feature or an investment without adequate knowledge or expertise. Make sure you only receive plan related advice or information from a specialized 401(k) plan tax professional.
Too often, plan participants make improper plan contributions or invest in a prohibited transaction because they were misled by a plan provider representative who was not qualified to provide proper tax advice regarding the unique features of the Plan.
When you work directly with a 401(k) plan tax professional that has been specifically trained on the special tax aspects of the Solo 401(k) plan to establish and maintain your Plan, you can guarantee your plan will remain in full IRS compliance and that you will not be engaging in any plan activities not approved by the Plan or the IRS, such as Prohibited Transactions.

The IRA Financial Difference

IRA Financial Group will take care of everything. The whole process can be handled by phone, email, fax, mail or with the new IRA Financial app. With our app, you can quickly and securely establish your plan, rollover assets from one plan to another, perform basic maintenance and make investments on your mobile device. Get started with app today. Before getting started, we encourage prospective clients to download our free Solo 401(k) information kit.

IRA Financial Solo 401(k) Services

Our one time low fee includes the following Solo 401(k) services:

  • Free tax consultation with our Retirement Specialists
  • Adoption Agreement
  • Basic Plan Document
  • EGTRRA Amendment
  • Summary Plan Description
  • Trust Agreement
  • Appointment of Trustee
  • Beneficiary Designation
  • Loan Procedure
  • Loan Promissory Note
  • Free tax updates
  • Free tax and ERISA support
  • Satisfaction Guaranteed!


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