Solo 401k Questions?

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Roth-IRA-401k (moderator)
Posted 2006-12-06 18:51:56

This the place to ask your Solo 401k questions?

solo 401k (moderator)
Posted 2006-12-07 18:18:48

Solo 401(k) Plan and SEP and Traditional IRA

I will be 52 in Dec. Self Employed, no employees. Currently have an IRA.
IRA started over 20 years ago and also includes rollover amounts from two other retirement plans.

Even though am self employed have been still using the Traditional IRA contribution limits. Am currently reviewing other retirement plan options.

For the most part it appears the SEP lets one contribute a bit more than the IRA while the Solo 401(k) is a much much higher maximum.

I was working a few numbers in my turbotax today using 40k net for my business. It calculated out an max contribution of $7435 for the SEP and a monster 25300 for the Solo 401(k).

If i do have the discretionary amounts to contribute more than the traditional IRA limits offer, It looks as though I should strongly consider opening an SEP orSolo 401(k) .

A few questions.

It does not look as the the Solo 401(k) are readily offered at the online brokerage houses as the IRA, SEP etc etc. Any suggestions?

Noticed the Solo 401(k) allowS you to borrow up to 50K. Does the SEP allow one to borrow?

Can I roll my Traditional IRA into a Solo 401(k)?

Do both have that provision in which I can begin withdrawing prior to 59 1/2 if I set up withdrawls made in equal installments over my life expectancy.

Thanks in advance

SEP-SOLO-IRA-401k-ROTH (moderator)
Posted 2006-12-21 11:11:54

1 It does not look as the the Solo 401(k) are readily offered at the online brokerage houses as the IRA, SEP etc etc. Any suggestions?

Yes, Fidelity offers one, but TD Ameritrade does not.

Their are many options. You could choose a Third Party Administrator(TPA) that would offer Solo 401k plans to almost any online services. Often those third parties are more flexible. For example for Fidelity's Solo 401k planed does not allow loans, but a TPA on the Fidelity platform does.

2 Noticed the Solo 401(k) allows you to borrow up to 50K. Does the SEP allow one to borrow?

No. While loans are not permitted from a SEP IRA, the account owner may make a qualified 60-day withdrawal and rollover once each year without incurring taxation or interest charges.

3. Can I roll my Traditional IRA into a Solo 401(k)?

Yes. Rollover to a Solo 401k plan
You are allowed to rollover or transfer your investments into a traditional IRA, SEP, Qualified Plans or Keogh's (Profit Sharing, Money Purchase Pension, and Defined Benefit), 401k, 403b and governmental 457 plans into the new plan. SIMPLE IRAs are eligible for rollover after a two year holding period is met.

4. Do both have that provision in which I can begin withdrawing prior to 59 1/2 if I set up withdrawals made in equal installments over my life expectancy.

Yes. The 72 t rule. even peroid payments are allowed In a IRA. Withdrawals from a SEP IRA and Solo 401k plan are taxed similar to an IRA, with participants paying ordinary income taxes plus a 10% penalty if distributions are taken before age 59 Ã�Â½,