IRA Financial Group, the leading provider of open architecture self-directed Solo 401(K) plans, announces the introduction of the Non-Deductible Contribution tax strategy, which allows one to reach the annual contribution limit much quicker. Under the Solo 401(k) plan Non-Deductible Contribution tax strategy, after tax deferrals (not Roth but not pre-tax) can be made dollar-for-dollar up to $53,000 of $59,000, including other plan contributions (employee deferrals and profit sharing). For example, a self-employed 40 year old individual earned $100,000 in 2015, he or she would be able to make a maximum employee deferral contribution of $18,000 in pre-tax or Roth and make an after tax contribution dollar-for dollar equal to $35,000, the difference between $53,000 (the maximum annual 401(k) contribution for 2015) and $18,000, the maximum employee deferral contribution limit. Those contributions can be then be converted to Roth without tax. Unfortunately, not all Solo 401(k) plans allow for nondeductible contributions, but IRA Financial Group’s 401(k) plan documents do.
According to Adam Bergman, a partner with the IRA Financial Group and author of the book, Going Solo: America’s Best Kept Retirement Secret For the Self-Employed – What Financial Institutions Won’t Tell You About Saving for Retirement, “The advantage making after-tax contributions versus a profit sharing contribution is that you can make a dollar for dollar contribution versus a profit sharing contribution, which is based off a percentage of your compensation (20% or 25%). If a profit sharing contribution was made instead of an after-tax contribution, the individual would only be able to make a $20,000 contribution giving him or her an annual contribution of just $38,000 versus $53,000, if employee deferrals were combined with after-tax contributions.”
Non-deductible 401(k) plans contributions are not new, but new IRS regulations Notice 2014-54) make after-tax contributions more attractive in a few ways. The new IRS regulations allow the retiree to effectively segregate the after-tax assets from the pre-tax funds. The pre-tax funds can be rolled into a Traditional IRA, whereas the after-tax dollars can be converted into a Roth IRA. “Prior to Notice 2014-54, there was a question as to whether after-tax funds can be converted to a Roth IRA. Notice 2014-54 clarified this rule and allows the pre-tax and after-tax funds that were distributed from a plan on a pro-rated basis to be separated once a distribution is made. One nice thing about after-tax contributions: The salary deferral limits that apply to other participant contributions do not necessarily apply to after-tax contribution.” Stated Mr. Bergman.
IRA Financial Group’s solo 401K plan is unique and so popular because it is designed explicitly for small, owner only businesses. With IRA Financial Group’s Solo 401(K) plan, self-employed individuals or small business owners with no employees can benefit by making high annual contributions – up to $53,000 – with an additional $6,000 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 $50,000 or 50% of their account value tax-free and penalty free. IRA Financial Group’s self-directed 401(k) plan online platform 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.
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, Dewey & LeBoeuf LLP, and Thelen LLP.
IRA Financial Group is the market’s leading provider of Self-Directed Solo 401(k) plan. IRA Financial Group has 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 without custodian consent.