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Funding

Can I rollover an existing Roth with investment to a self-directed Solo 401k?

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Can I rollover an existing Roth with another investment to a self-directed Solo 401k?

Answer:

If you’re talking about Roth IRA assets, the answer is no.

Roth IRA assets can only go from a Roth IRA account to a Roth IRA account.

If you’re talking about Roth 401k account assets from another Roth 401k, that’s what’s called a designated Roth account inside of a 401k. Designated Roth account assets inside of 401ks can be moved to another designated Roth account inside of another 401k which you have that ability with your Solo 401k.

Can my investment income be contributed to a Solo 401(k)?

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Answer:

Most likely your investment income is passive income.  Passive income cannot be contributed to the Solo 401(k).  Contributions to any retirement account must come from the earned income of the business sponsoring the 401k plan.

You may be able to designate all or a portion of your investment income as earned income, however. Please consult with your CPA. Your CPA may make this determination based on the management or administrative work you perform for your investments.

Contribute to Solo 401k from multiple companies

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I want to be able to contribute to my Solo 401k from multiple companies to maximize the contribution potential. How can I do this?

Answer:

To do this, general opinion is that you can set up a holding company for the separate companies and make the holding company the adopting company for the Solo 401k. A holding company is usually a company that doesn’t do any business with anyone, it just owns other companies. The trick to making this work is of course to have the other companies which would be called, “Subsidiary companies” – the companies that go out there and do business and are owned by the holding company.

Those need to be pass-through entities; meaning that they don’t pay taxation at their own level, they just pass through the earning up to the parent company. So LLCs are pass through entities, and if you use LLCs, then one other benefit you’ll get is that you’ll have the subsidiary company structured as an LLC and it only has one owner or one member which would be the parent company. It would be a single member LLC. If you have a single member LLC, it doesn’t even have to file a tax return in the first place. Single member LLCs the IRS instructs to be disregarded for tax purposes. For further clarification, please consult your CPA or tax/legal advisor.

Having a current employer’s 401k plan and a Solo 401k plan

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Does my current employer’s 401k plan have any effect on my Solo 401k plan, such as the contribution limit?

Answer:

Please see our Contribution Calculator for current contribution limits and an explanation of how to calculate them.

In your Solo 401k plan, there are two types of contributions:

  • Employee contributions (salary deferral)
  • Employer contributions (profit sharing)

The employee contribution limit is per person, not per plan.  This means that any contributions made towards your employer’s 401k plan as an employee will reduce the amount you can contribute to your Solo 401k as an employee for that year.

For example, if you are over the age of 50, then your maximum contribution limit as an employee is $24,000 for 2017.  If you contribute $10,000 to your employer’s 401k plan, you can only contribute up to $14,000 as an employee to your Solo 401k plan.

As always, please consult your CPA or tax advisor.