Discussion:Roll IRA into solo 401k then borrow
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Discussion Forum Index --> Tax Questions --> Roll IRA into solo 401k then borrow
DDouglasCPA (talk|edits) said: | 6 January 2006 |
| A client formed an LLC and created a solo 401k. He then rolled a large IRA into the 401k and borrowed half of it. I'm pretty sure this loophole must have been closed but can't it in the Regs. Help? | |
| 7 January 2006 | |
| This loophole was made even larger in 2001 when Congress decided that self-employed individuals should be able to borrow from their qualified retirement plans. | |
| 9 January 2006 | |
| Can you roll an IRA into a qualified plan? I always thought that this was prohitibed. | |
| 31 October 2006 | |
| You can rollover a Traditional IRA, Rollover IRA, SEP IRA, 401k with a previous employer etc into a Solo 401k / Individual 401k and then can borrow up to 1/2 of the value up to a $50,000 maximum. Here is some information about rollovers and loans from http://www.individual401k.com
Retirement Plan Consolidation An important feature of the Individual 401k plan is the opportunity to consolidate retirement assets into one account. This includes Traditional IRAs, SEP IRA Plans, 401k Plans, Money Purchase Plans, SIMPLE IRAs, Profit Sharing Plans, Defined Benefit Plans, 403b Plans and IRA Rollovers. Consolidating retirement accounts is particularly important if you would like to use the loan provision. Other advantages of rolling over and consolidating your retirement plans into your individual 401k are improved financial organization and ease of monitoring your retirement portfolio. Access to Tax-Free Loans As with traditional 401k plans, you can take tax-free loans from your individual 401k plan. Loans are not permitted with Traditional or Roth IRAs, SEP IRAs, or Keogh (Money Purchase/Profit Sharing Plans). Tax free loans are permitted in an individual 401k up to 50% of the total 401k value up to a maximum of $50,000. Generally, loans have a 5 year maximum repayment term unless the loan is used for the purchase of a primary residence. Loans used for the purchase of a primary residence can have a longer repayment term. Loans must be repaid according to the terms of the loan amortization schedule which is provided when a loan is initiated. Failure to repay the loan according to these terms may result in a loan default causing taxes as well as IRS penalties. | |
| 4 March 2008 | |
| Any thoughts on setting up a company whose sole purpose is to establish a 401K for a rollover in order to take a loan? I have a client that wishes to do this and ability aside, it seems a little reaching. | |
