Are you self-employed? Do you do the work yourself without any employees in any of the companies you own? Then you may qualify for a Solo 401(k) account.
- You have higher contribution limits than most other retirement accounts
- Your Solok can have a “Roth” bucket allowing you to make Roth contributions regardless of income (no income cap)
- You can borrow from a Solok for personal use, whereas you cannot borrow from an IRA
The Old Way
There are new changes for the timing when setting up a Solo 401k. The old rule said the Solo(k) had to be established by the end of year for which wanted to contribute. For example, if you wanted to contribute for 2019, the plan had to be opened by December 31st, 2019. You could make the contribution up until April 15, 2020 (changed to July 15, 2020). The prior-year contribution date was set by either the tax filing deadline or the deadline if you filed an extension.
The New Way
The new rules are much more user-friendly. Now, you have until the tax filing deadline or the extension deadline to get the account opened. The year-end deadline to establish an account is abolished.
To make a 2020 contribution, you have until the tax filing deadline in 2021 (which is usually April 15th) to get the account opened. You still have until the tax filing deadline or the extension time to make the prior-year contribution.
With the Covid-19 issue, the tax filing deadline for 2020 was extended to July 15th, 2020.
So, in 2020 and thereafter the Solo(k) acts like other accounts in that there is no year-end deadline to establish your account to make a prior-year contribution.
Find Out More
To learn more and to find out if a Solo(k) account is for you, please contact uDirect IRA Services at info@uDirectIRA.com or (866) 447-6598.