Learn about Solo 401(k)s and new Roth rules. Understand the benefits of a Solo 401(k) for self-directed investments. Discover strategies for maximizing contributions and moving IRA funds to a Solo 401(k) Roth account. Explore resources for self-directed IRAs and Solo 401(k) plans. Find out how to maximize contributions through different methods. Get details on upcoming live events discussing self-directed IRA and alternative asset investments.
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Quick takeaways
Contributing to a Solo 401(k) allows for higher yearly contributions compared to an IRA.
Secure 2.0 legislation enables employer Roth contributions in Solo 401(k) plans, providing tax-free growth and withdrawals in retirement.
Utilizing the mega backdoor Roth strategy within a Solo 401(k) allows individuals to maximize Roth contributions and benefit from tax-free growth and withdrawals.
Deep dives
Benefits of Solo 401(k) Contributions
Solo 401(k) contributions allow self-employed individuals to maximize their retirement savings by contributing up to $69,000 per year. Contributions can be made as both an employee and an employer, allowing for greater flexibility and higher contribution limits compared to other retirement plans.
Opportunity for Roth Contributions
Secure 2.0 legislation now allows for employer Roth contributions in Solo 401(k) plans. This gives self-employed individuals the option to make contributions using after-tax funds, providing the opportunity for tax-free growth and withdrawals in retirement.
Mega Backdoor Roth Strategy
The mega backdoor Roth strategy allows individuals to maximize their Roth contributions within their Solo 401(k) plan. By making after-tax contributions and rolling them over to a Roth IRA, individuals can grow their retirement savings in a tax-free environment, increasing the benefits of the Solo 401(k) plan.
Employer Roth Contributions in New Retirement Account Legislation
One of the key provisions in the new federal retirement account legislation, Secure 2.0, is the ability to make employer Roth contributions. Previously, Roth contributions could only be made by employees, but under the new law, employers can now contribute to Roth accounts as well. This means that employees can now enjoy the benefits of tax-free growth and tax-free withdrawals in their retirement accounts. The new rules also specify that when making employer Roth contributions, the company can still take a tax deduction, but employees will need to report the contributions as taxable income on their personal tax return.
Terminating and Closing Out a Solo 401(k) Plan
If you are retiring or winding down your business and have a solo 401(k) plan, there is a specific process to follow in order to terminate and close out the plan. First, you need to move the assets out of the plan, which can be done by transferring them to a self-directed IRA. Then, you must complete a plan termination document and file a final 5500-EZ form to report the plan's assets and the rollover to the IRA. It is important to note that even if your plan assets are below $250,000, you still need to file the final 5500-EZ if you are terminating the plan.
In this webinar, Mat Sorensen, CEO, and Aaron Halderman, COO of Directed IRA discuss everything you need to know about Solo 401(k)s
We cover the following topics:
-New Roth Rules for 2024 and Beyond -Contributing 10 times more annually than an IRA -Understanding the necessity of an LLC for a Solo 401(k) -Qualification criteria -Avoiding common mistakes -Exploring the increased contribution limits for 2023 ($66k) and 2024 -Answering your questions
