Tax-free investments and Potentials of a Roth Solo 401k account

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Yahoo Finance recently published an article which dicusses tax issues for multi-million worth IRA accounts. Sense Financial explains why a Roth Solo 401k or a Roth IRA account can help investors grow their wealth tax-free.

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The idea of tax-free investment has long been considered a powerful strategy. Because the tax is paid up front, the money cannot be taxed again.

On January 2, 2015, an article on Yahoo Finance raised a question of whether or not multi-million worth IRA accounts are presenting an issue to the federal taxing system.

According to the article, each IRA can only receives $5,500 in contribution a year, which means it will take a long time to accumulate millions of dollars by normal means of savings and investing. What most people don’t realize is that founders of startups can invest in their own firm’s private shares, which do not worth a lot at the beginning. Once the firm successfully becomes publicly traded, the value of the shares can inflate overnight, generating millions of dollars to the account holders.

The issue is that, if the account is a Roth-type, the plan holders have already paid tax on their very low-value contribution up front. Therefore, there will be no tax on their multi-million earnings at the time of withdrawal.

The question of whether this is a serious issue or not - and if so, how to address it - remains debatable. Sense Financial, however, sees this as a worthy illustration of how Roth accounts, including Roth IRA and Roth Solo 401k can work greatly in the account holders’ favor.

The idea of tax-free investment has long been considered a powerful strategy. Because the tax is paid up front, the money cannot be taxed again. This means not only the principal contributed amounts, but also the gains from investing the account will not be charged with any tax at all upon retirement. Although not recommended, account holders also have the option of withdrawing the contributed amount from a Roth IRA or a Solo 401k before their retirement age without tax.

While the chance of becoming an overnight millionaire with a start-up is slim, investors can still take advantage of this tax-free strategy to grow their retirement funds. The Solo 401k plan also gives plan holders many advantages to invest successfully, including the flexible investment options, the ability to leverage real estate purchases, and high contribution limits. Plan holders have the potential to grow their funds quickly through investments, which makes tax-free investment even more important.

Sense Financial is California's leading provider of retirement accounts with "Checkbook Control": the Solo 401k and the Checkbook IRA. Over the years, they have assisted hundreds of clients to obtain checkbook control over their retirement accounts while providing them with the ability to invest in virtually any investment class, including real estate, private lending, mortgage notes and much more without the need for custodian approval.

To learn more about Solo 401k, please visit

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Vanessa Pham - Retirement Accounts with Checkbook Control
since: 07/2011
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