Perfect for any sole proprietor, consultant, or independent contractor.
What is the Solo 401(k)?
A Solo 401(k) is a traditional 401(k) plan that covers only one employee. In general, to be eligible to establish this plan, one must be self-employed or have a small business with no full-time* employees other than a spouse or other owner(s).
One of the primary reasons this plan is so popular with self-employed is because it includes all the attractive options of a conventional 401(k) qualified retirement plan, but without the costly administrative requirements.
When determining what type of Solo 401(k) plan works best for you, it’s best to look at all the options the plan provides to make sure it satisfies your retirement planning, tax, and investment goals.
The self-directed Solo 401(k) plan is generally offered by trust companies or facilitators, such as the IRA Financial Group, who are not in the business of providing investment advice or selling investment products.
Next, you’ll find a short overview of what IRA Financial Group’s Self-Directed Solo 401(k) offers. You can also check out our learn more pages for in-depth information and see how you can benefit from a Solo 401(k) Plan.
*A full-time employee is someone who works more than 1000 hours a year.
one-time establishment fee
What’s included in the Solo 401(k)?
- Establishment of IRS approved Self-Directed Solo 401(k) Plan
- Free Solo 401(k) Plan tax consultation with in-house tax professionals
- IRS Opinion Letter
- Adoption Agreement
- Basic Plan Document
- EGTRRA Amendment
- Summary Plan Description
- Trust Agreement
- Appointment of Trustee
- Beneficiary Designation
- Loan Procedure
- Loan Promissory Note
- Application for plan trust EIN
- Assistance with tax-free rollover of funds to Solo 401(k) Plan
- Assistance with opening plan bank account
- Free Solo 401(k) Plan tax support
- Free tax consultation on the UBTI and UDFI rules
- Free tax consultation of “Disqualified Person” and “Prohibited Transaction” Rules
- Free tax consultation with in-house CPA on IRS Form 5500-EZ & assistance with completing form
- Guaranteed IRS audit Protection
What our Solo 401(k) offers
High Contribution Limits
Plan participants under the age of 50 can make a maximum employee deferral contribution of $19,000 ($25,000 if over 50). That amount can be made in pre-tax or after-tax (Roth).
With our checkbook control plan, you can serve as trustee and gain control over your retirement funds. Making investments, such as in real estate, is as easy as writing a check or executing an online wore transfer.
Tax-Free $50,000 Loan
Participants can borrow up to either $50,000 or 50% of their account value, whichever is less, tax free and without penalty. This loan has to be repaid over an amortization schedule of 5 years or less with payment frequency no greater than quarterly.
Tax-Free Real Estate Investment
Real estate purchased with an IRA is leveraged with mortgage financing and creates Unrelated Debt Financed Income (UDFI), a type of Unrelated Business Taxable Income (UBTI or UBIT). But with a Solo 401(k), you can use leverage without being subject to the tax.
The Solo 401(k) plan is very easy to administer. There is generally no annual filing requirement unless your plan exceeds $250,000 in assets, in which case you will need to file a short information return with the IRS. The short information return is Form 5500-EZ.
Strong Creditor Protection
Retirement accounts have become many Americans’ most valuable assets. So it’s vital that you have the ability to protect them from creditors, such as people who have won lawsuits against you.
What you can do now
Learn if you qualify
Don’t know which plan you qualify for? Have questions about a transaction? Our tax professionals are here to help and will get back to you ASAP.
Open An Account
We’ll take care of everything. We’ve helped over 12,000 clients open self-directed retirement accounts over the last 10 years. The whole process can be handled by phone, email, fax, or mail. Our expert tax and ERISA retirement professionals are on-site, greatly reducing the set-up time and cost.
Call us at 800-472-0646 to get started; we’ll help you get a self-directed retirement structure started within minutes.
We have a ton of resources that will help answer all your questions. We understand the importance of education when it comes to retirement, and we want to make sure you’re confident about every decision you make.
Terms you may have heard
We know there’s a lot of information out there; these terms will help you sort through the different types of plans.
A SEP (Simplified Eligible Participants) is a retirement savings plan that the employer establishes, particularly self-employed individuals. These include independent contractors, sole proprietorships or partnerships for the benefit of their employees. It’s a type of traditional IRA that benefits the self-employed and small business owners.
Employers may make tax-deductible contributions on behalf of eligible employees – including the business owner – to their SEP individual retirement account. The maximum SEP IRA contribution amount is 25%. If you are self-employed or a single member LLC, it’s 20% of an employee’s compensation.
The SEP IRA follows the same distribution rules as a traditional IRA.
A SIMPLE IRA (Savings Incentive Match Plan for Employees) gives employees and employers the ability to contribute to traditional IRAs. These retirement accounts are set up for employees. A SIMPLE IRA is an ideal retirement plan for start-ups and small employers with no current retirement plan.
Any employer (including self-employed individuals, tax-exempt organizations, and governmental entities) with fewer than 100 employees and $5,000 or more in compensation during the preceding calendar year can establish a SIMPLE IRA plan. This plan allows eligible employees to contribute part of their pretax compensation.
The Solo 401(k) Plan is very tax-advantageous to self-employed individuals and small business owners. This is thanks to the high contribution, which is $56,000.
Additionally, there are two types of favorable contributions you can make. The first, is the Employee Contribution, also called the Elective Deferral. Contribution is $19,000 if you’re under the age of 50; $25,000 if you’re 50 and older.
The second contribution is the Employer Contribution, also called the Profit Sharing contribution. In 2018, you can contribute over $55,000. For 2019, the contribution increases to $56,000 +. It’s important to note that if you don’t earn $55,000/$56,000, you cannot make this contribution.
With your Solo 401(k) Plan, you have the option to take out a loan tax and penalty-free. You can borrow up to 50% of your retirement funds, or $50,000 – whichever is less. You can use this money for any purpose. As a result, it truly comes in handy during financial crisis. You will not receive a penalty because it’s a loan, not a distribution.
The interest rate for the loan is low, however the payback is five years. Due to the short payback, it’s important to keep in mind that the payments are higher and therefore more difficult to pay off. If you cannot pay back the loan in five years, it will then be considered a withdrawal. If you’re younger than 59 1/2, you’ll receive a penalty and have to pay income tax.