After-Tax Solo 401(k) Plan Contribution Tax Strategy Helping Generate Interest in Solo 401(k) Plans

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IRA Financial Group sees increase demand for self-directed solo 401(k) plans because of after-tax contribution option

IRA Financial Group sees increase demand for self-directed solo 401(k) plans because of after-tax contribution option

One of the nice things about after-tax contributions is that it can really help boost a plan participant’s annual plan contribution amount and allow for automatic in-plan rollovers to an IRA or another 401(k) plan

IRA Financial Group, the leading provider of self-directed Solo 401(K) plans has seen an increase in demand for its Solo 401(k) plan largely as a result of the after-tax contribution strategy, which allows one to reach the annual contribution limit much quicker then using employer profit sharing contributions. Under the Solo 401(k) plan after-tax contribution 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 2015. 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.”

After-tax 401(k) plans contributions are not a new phenomenon, 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 of the nice things about making Solo 401(k) non-deductible contributions is that it can really help boost a plan participant’s annual plan contribution amount and allow for automatic in-plan rollovers to an IRA or another 401(k) plan.” Stated Mr. Bergman.

IRA Financial Group’s Solo 401K plan is unique and so popular because it is designed explicitly for small, owner only business. With IRA Financial Group’s solo 401K 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 “checkbook control Self Directed IRA Facilitator. 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.

To learn more about the IRA Financial Group please visit our website at http://www.irafinancialgroup.com or call 800-472-0646.

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Jaclyn Baily
IRA Financial Group, LLC
+1 (800) 472-0646 Ext: 9
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