In 2002, the Economic Growth and Tax Reconciliation Act granted the solo 401(k) equal benefits to a traditional 401(k), greatly popularizing the plan. The flexible retirement plan quickly gained widespread praise and recognition– mainly for its substantially higher contribution limits, which include employee deferral contributions as well as profit sharing contributions. For 2012, the maximum 401(k) plan contribution is $50,000 for individuals under 50 years old and $55,000 for those over 50 years old.
In recent years, a wave of white-collar professionals have cut ties with the corporate grind to pursue second careers as real estate brokers. According to the National Association of Realtors (NAR), more than one-third of realtors report that they had a prior career in management, business, finance or sales. Furthermore, the majority of these real estate agents classify themselves as self-employed. Eight of 10 realtors are affiliated with their firm as independent contractors, qualifying for a solo 401k retirement plan. “The solo 401(k) plan has surpassed the SEP IRA as the retirement plan of choice for the majority of real estate professionals,” stated Adam Bergman, a tax attorney with the IRA Financial Group.
IRA Financial Group’s self employed 401K plan is unique and so popular for real estate professionals because it is designed explicitly for self-employed professionals. With IRA Financial Group’s solo 401K plan, self-employed individuals or small business owners with no employees can benefit by making high annual contributions – up to $51,000 – with an additional $5,500 catch-up contribution for those over age 50, make traditional as well as non-traditional investments, such as real estate, as well as borrow up to $51,000 or 50% of their account value tax-free and penalty free. IRA Financial Group’s solo 401(k) plan is a trustee directed plan meaning the trustee and not the custodian is in charge of making investment decisions on behalf of the plan. With a solo 401(k) plan, in most cases the trustee will be the plan participant providing the plan participant with greater control and investment authority over his or her retirement funds. In addition, with IRA Financial Group’s solo 401K Plan, the plan account can be opened at any local bank, including Chase, Wells Fargo and even Fidelity.