INDIVIDUAL RETIREMENT ACCOUNT VS. SOLO 401K
INDIVIDUAL RETIREMENT ACCOUNT (IRA)
SOLO 401K
Draconian Rules: Make one mistake, and the IRS can forcibly distribute your IRA.
If you make a mistake, only the mistake gets distributed.
Financial purchases are subject to income tax to the extent they are financed.
No financial debt issues except they must be non-recourse.
You cannot borrow money from your IRA.
You can borrow from your 401(k). The maximum amount is (1) the greater of $10,000 or 50% of your vested account balance, or (2) $50,000, whichever is less. Don’t have to take distributions, but you’re allowed to take them, tax-free, at age 59.5 if you’ve owned the account for five or more years.
Required to take distributions at 70.5 years of age.
Has some lawsuit protection.
Has much more lawsuit protection, as there are statutes in place.
the current limit if $5,500. The limit is $6,500 if you are over the age of 50. If you have a business, you can set up a solo 401(k), which can provide far more protection and allows you to act with a little more freedom. You have the ability to set aside up to $18,000 in elective deferrals ($24,000 if you’re 50 or older) and up to 25 percent of
employer non-elective contributions. Keep in mind, you can never combine funds, and all the self-dealing and prohi- bition transactions rules are still in place. The accompanying chart can help you determine what is best for you. The bottom line, in my opinion, is that if you have a business, you are better off to set up a solo 401(k) for all
the reasons listed above. Now, I’m not an attorney or CPA, but I have first- hand experience with everything I have written about. I urge you to take action now so you and your family can have the lifestyle you desire in your retire- ment years. Be sure to consult your own tax or legal professional to craft the best plan for you and your situation. •
BY RJ PALANO
RJ Palano is the acquisition director of BuyCashFlowProperties.com, a Tampa, Fla.-based company that primarily provides turnkey houses for investors in the metropolitan Atlanta and Tampa Bay areas. His property management experience spans 35-plus years, and he has been involved in more than 3,000 real estate transactions in 12 states and more than 50 cities. 813-495-3006 | RJP@BuyCashFlowProperties.com
MAY/JUNE 2016 9
Made with FlippingBook Online document