When is it too late to setup a Solo 401(k)
L1: When is it too late to setup a Solo 401(k)
10/1963 birthdate. Separated from employer in 8/2014. Retired. Living on interest and dividends and savings since then.
Rolled over 401(k) to Rollover IRA combined with previous job 403(b) monies.
Can I start my own company now and create a solo 401(k) plan to use the Rule of 55 to withdrawl without penalty whatever amount I need in the future dates after 10/2018?
Or once a 401(k) monies is mixed with 403(b) amounts, it is too late?
If I could document the 401(k) portion since the investments I made with the monies didn’t change from 8/2014 since I rolled in the money to now, could I then rollout the 401(k) money and use that to start my solo 401(k). So far only distributed monies from this account for medical expenses, tax free in 2015, and 2016. I could show that I used 403(b) investment monies in that account for the tax free distribution.
If I could setup my solo 401(k) before I’m 55, when I turn 55, will the rule of 55 be applicable then?
I was going to portion this retirement money into a SEPP custodial account to do the 72t. But I think rule of 55 would suit me better if applicable. I can wait until I’m 55 to withdrawl monies. I only need to withdrawl an additional $8k annual income to qualify for ACA.
2018-04-21 07:41, By: BPrincess, IP: [126.96.36.199]
L2: When is it too late to setup a Solo 401(k)
You have a lot of moving parts here, but they are irrelevant. Once they are all in an IRA, it doesn’t matter if they are co-mingled. In past years you had to keep rollovers separate, but that requirement was changed a few years ago.
You can set up a solo 401-K at any time. It must be for a valid business you set up, which has earned income. Ater you set it up, you can do an electronic transfer of any amount, or all, into the solo 401-K. At any time in the year in which you will become 55, even in January when you are 54, you can take withdrawals of any amount at any time, and these will not be subject to the 10% early distribution penalty. You can also make contributions to your new solo 401-K plan, which usually makes sense to help establish it as a valid 401-K. These contributions are deductible, unless you set it up as a ROTH 401-K.
I suggest that you work with an experienced tax professional to cover all of the bases.
2018-04-21 15:36, By: dlzallestaxes, IP: [188.8.131.52]
L3: When is it too late to setup a Solo 401(k)
I was going to use my solo 401(k) to withdraw money out by using the rule of 55. But reading more about it, it wouldn’t apply to 401(k) funds other than the job I am currently in that has the solo 401(k), rollovers don’t count. So I really should have left my job during year I turned 55. Too late now. Looks like 72t for me.
The advice I see on this forum is better than Slott site. And many paid professional are not updated on SEPP. I will double-check with Fidelity before finalizing plans.
Now that put a portion of my IRA for SEPP. What valuation do I use for the calculations? The day I setup the account,4/22/2018 or date of funding 4/25 or date of first withdrawal 4/29 since December 31 of previous year did not happen.
2018-04-21 20:21, By: BPrincess, IP: [184.108.40.206]
L4: When is it too late to setup a Solo 401(k)
The problem with using a solo K for purposes of the age 55 penalty exception is that the exception requires you to be separated from service, ie. the business must be shut down and the solo K balance rolled out within months. A 5500 EZ must be filed if the balance exceeds 250k including any rollovers you did into the solo K. Therefore, you would only be able to take penalty free distribution for a few months between the time that you shut the business down and the time when you had to roll over the balance out of the solo K. You would need the penalty exception for longer than a few months, typically until you reach 59.5. Therefore, there a solo K will not help you to avoid the penalty for a long enough period to be worth the effort.
2018-04-23 04:11, By: Alan S, IP: [220.127.116.11]
L5: When is it too late to setup a Solo 401(k)
You could set up multiple solo 401ks for separate businesses. Subject to tax bracket limitations, the Solo 401k can still save several thousand dollars.
2018-04-23 18:44, By: Sm69, IP: [18.104.22.168]
L6: When is it too late to setup a Solo 401(k)
I was planning to use the solo 4O1K to withdrawl monies from my previous employer without 10% penalty, but that will not work for me. Since rollover money doesn’t count with a rule of 55 withdrawl of 4O1K.
So I am abandoning the plan, and just using 72t transactions.
Thanks for all your helpful replies.
2018-04-24 09:07, By: BPrincess, IP: [22.214.171.124]
L7: When is it too late to setup a Solo 401(k)
Why do rollover contributions not count with Solo 401ks?
2018-04-24 16:30, By: Sm69, IP: [126.96.36.199]
L6: When is it too late to setup a Solo 401(k)
Apparently there are nuances that do not make solo 401-K plans a viable solution. As far as multiple solo 401-K plans, this would not be allowed because of the “common ownership” provisions of the tax code which require that if there are any employees in companies owned by the same person, or groups of people, then all employees of all of these companies must be included in the “best” of the plans for any of the companies.
This regulation was passed a number of years ago when companies, usually medical practices, set up “management companies” with pensions for the owner, and none of the nurses were covered.
2018-04-24 15:44, By: dlzallestaxes, IP: [188.8.131.52]