The individual 401(k) Plan, also known as the solo 401(k) or Self-Directed 401(k) Plan, is an IRS approved type of qualified retirement plan which is suited for business owners who do not have any employees, other than themselves and perhaps their spouse. The individual 401(k) plan is not a new type of plan. It is a traditional 401(k) plan covering only one employee.
There are different types of individual 401(k) plan providers. The most common type of individual 401(k) plan provider is the traditional financial institution, such as Fidelity, Vanguard or Bank of America. The individual 401(K) Plan these type of traditional financial institutions offer are typically quite restrictive and only generally allow one to make investments offered by said financial institution. In addition, the plan is also quite basic in terms of the available options and generally does not allow for plan loans or Roth contributions.
Another type of individual 401(k) plan provider is the self-directed individual 401(k) plan type companies that offer open architecture “checkbook control” type plans. IRA Financial Group is the market’s leading self-directed individual 401(k) plan facilitator and offers open architecture individual 401(k) plans. Unlike a traditional financial institution, such as Vanguard and E-Trade, which earns income and commissions from selling financial products, IRA Financial Group focuses solely on the establishment and administration of 401(k) plans and does not offer any investment advice. Accordingly, IRA Financial Group individual 401(k) plan documents are open architecture and provide the adopting employer and plan participants with all available options under the law.
High Contributions: For 2014, IRA Financial Group’s individual 401(k) Plan will allow a plan participant to make annual contributions up to $52,000 annually with an additional $5,500 catch-up contribution for those over age 50. The high contribution feature is one of the reasons an individual 401(k) Plan is the most popular retirement vehicle for the self-employed.
Tax and Penalty free loan: Unlike most individual 401K Plans offered by the traditional financial institutions such as Fidelity, IRA Financial Group’s individual 401K Plan allows plan participants 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, 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 attractive feature of the IRA Financial Group individual 401k Plan is that it offers the plan participant checkbook control over his or her retirement funds. In the case of a conventional individual 401K Plan offered by most financial institutions, the plan participant is relegated to making traditional investments such as stocks and or mutual funds. In addition, the individual 401K Plan account is required to be opened at the financial institution. With IRA Financial Group’s individual 401K Plan, the plan account can be opened at any local bank, including Chase, Wells Fargo, and even Fidelity. In addition, with IRA Financial Group’s individual 401K Plan, the plan participant can make almost any traditional as well as non-traditional investments, such as real estate, precious metals, tax liens, and much more. With IRA Financial Group’s individual 401K Plan, the Plan participant has the freedom to make the investments he or she wants while at the same time opening the 401K account at any local bank. As trustee of the individual 401K Plan, the Plan Participant (you) can serve as the trustee providing you checkbook control over your retirement funds. With IRA Financial Group’s individual 401K Plan, making an individual 401K Plan investment is as simple as writing a check.
Roth Contributions & Conversion: Unlike a conventional individual 401K Plan offered by most financial institutions, IRA Financial Group’s individual 401K Plan contains a built in Roth sub-account which can be contributed to without any income restrictions. In addition, the IRA Financial Group’s individual 401K Plan allows for the conversion of a traditional 401(k) or 403(b) account to a Roth sub-account. However, the individual 401K Plan participant must pay income tax on the amount converted.
Offset the Cost of Your Plan with a Tax Deduction: By paying for your individual 401(k) with business funds, you would be eligible to claim a deduction for the cost of the plan, including annual maintenance fees. The deduction for the cost associated with the individual 401(k) Plan and ongoing maintenance will help reduce your business’s income tax liability, which will in-turn offset the cost of adopting a self-directed individual 401(k) Plan. The retirement tax professionals at the IRA Financial Group will help you take advantage of the available business tax deduction for adopting a individual 401(k) Plan.
Easy Administration: Like all individual 401K Plans, IRA Financial Group’s individual 401K Plan is easy to operate. There is generally no annual filing requirement unless your individual 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). However, unlike a financial institution, the tax professionals at the IRA Financial Group will assist you in completing this form is required.