Over 80% of CPAs and tax professionals surveyed choosing the Solo 401(k) Plan vs. the SEP IRA as the retirement plan of choice for the self-employed
IRA Financial Group, the leading provider of self-directed solo 401(k) Plans announces the finding of its survey showing the over 80% of accountants and CPAs that were interviewed considered the Solo 401k Plan a more attractive retirement plan option for the self-employed or small business owner than the SEP IRA. IRA Financial Group surveyed over 50 accountants, CPAs, and tax professionals throughout the United States and asked them which retirement plan they have been recommending to their self-employed clients between the solo 401k plan and the SEP IRA. “The survey results showed that the popularity of the solo 401(k) Plan is now starting to become mainstream in the accounting world, “ stated Adam Bergman, a tax attorney with the IRA Financial Group.
According to Mr. Bergman, just five years ago the majority of CPAs and the tax professionals were recommending the SEP IRA over the solo 401(k) Plan as the best retirement plan for the self-employed or small business owner with no full-time employees. “It has taken time, but CPAs and tax professionals throughout the United States are starting to embrace the significant benefits of the solo 401(k) Plan vs. the SEP IRA for self-employed individuals from a retirement, tax, and investment perspective, “ stated Mr. Bergman.
A solo 401(k) plan” is an IRS approved retirement plan, which is suited for business owners who do not have any employees, other than themselves and perhaps their spouse. The “one-participant 401(k) plan” or individual 401(k) Plan is not a new type of plan. It is a traditional 401k plan covering only one employee.
One of the main advantages of a solo 401(k) Plan vs. a SEP IRA is that an individual can reach his or her maximum annual contributions quicker. A solo 401(k) Plan includes both an employee and profit sharing contribution option, whereas, a SEP IRA is purely a profit sharing plan. Under the 2013 new solo 401(k) contribution rules, a plan participant under the age of 50 can make a maximum employee deferral contribution in the amount of $17,500. That amount can be made in pre-tax or after-tax (Roth). On the profit sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single member LLC) profit sharing contribution up to a combined maximum, including the employee deferral, of $51,000, an increase of $1,000 from 2012.
For plan participants over the age of 50, an individual can make a maximum employee deferral contribution in the amount of $23,000. That amount can be made in pre-tax or after-tax (Roth). On the profit sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single member LLC) profit sharing contribution up to a combined maximum, including the employee deferral, of $56,500, an increase of $1,000 from 2012.
Whereas, a SEP IRA would only allows for a profit sharing contribution. Hence, a participant in a SEP IRA would be limited to 25% (20% in the case of a sole proprietorship or single member LLC) profit sharing contribution up to a combined maximum of $51,000 for 2013. No employee deferral exists for a SEP IRA.
In addition, with a solo 401(k) Plan, a plan participant can borrow $50,000 or 50% of his or her plan account value, whatever is less. A loan is not available with a SEP IRA. “The loan feature is a popular feature that many CPAs and accountants mentioned as a reason why the solo 401(k) Plan is a better plan than the SEP IRA for the self-employed, “ stated. Mr. Bergman.
The IRA Financial Group was founded by a group of top law firm tax and ERISA lawyers who have worked at some of the largest law firms in the United States, such as White & Case LLP and Dewey & LeBoeuf LLP.
IRA Financial Group is the market’s leading “Checkbook Control” Self Directed IRA and solo 401k Plan Facilitator. We have helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate tax-free and without custodian consent!