Individual(k) Plans

Self-Directed Individual(k) Basics:
An Individual(k) plan is a cost-effective 401(k)/profit sharing plan for small business owners. The Individual(k) has 401(k)-like options for sole proprietors or small business owners. The plan offers the highest contribution amounts and lower administration fees of all plans.

The Individual(k) was designed exclusively for owner-only and small businesses with no employees or if the employees fall outside of certain guidelines (works less than 1,000 hours or are under 21). Be sure to verify this exclusion information with a New Direction representative to avoid increased plan fees.

You are eligible for an Individual(k) if your business is a sole proprietorship, partnership, limited liability corporation (LLC), or incorporated business, including subchapter “S” Corporation.

As of January 1, 2006, individuals are allowed to claim a portion of their contributions as Roth contributions, thereby taking advantage of the potential for tax-free growth.

Why Consider a Self-Directed Individual(k)?

  • You are a sole proprietor with no additional employees other than your spouse or partners.
  • You are looking for the largest potential contribution for a business without employees.
  • You want the capability of borrowing from your plan.
  • You want to purchase leveraged real estate in your plan and wish to avoid UBIT (Unrelated Business Income Tax).

Types of Individual(k) Plans:

1. Plan Documents Only

The individual 401K plan documents are rented on an annual basis from New Direction IRA.  The trustee of the plan decides which options within the plan to allow and New Direction provides the plan documents.  The trustee is in charge of all bookkeeping and reporting for the plan.

  • New Direction IRA provides the required documents to establish the plan.
  • You perform your own investment record-keeping.
  • This option is only available with the Individual(k) Plan.

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2. Record Keeping Only

The trustee has an Individual 401K plan document and need record keeping done for the investments.  An account is opened at New Direction IRA to record and update any investments the plan makes.  New Direction does not provide any plan documents.

  • You have an approved plan document.
  • New Direction IRA provides the required record-keeping on self-directed investments.
  • This option is available with plan types such as a traditional 401(k), Roth 401(k), profit sharing plans, and employer stock ownership plans.

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3. Traditional or Full Service Model

The trustee rents the Individual 401K plan document from New Direction IRA and also has New Direction complete the bookkeeping and reporting for the plan.  This option combines the two plans described above.

  • New Direction IRA provides the required documents to establish the plan.
  • New Direction IRA provides the record-keeping services on your self-directed investments.
  • This option is only available with the Individual(k) Plan.

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4. Individual(k) Plan with ROTH Option

If you choose the Roth option, a portion of your contributions will not be tax-deductible. However, the earnings may be distributed tax free.
If you’re considering an New Direction IRA Individual(k), be sure to consult with your accountant or investment advisor.

Individual(k) Contribution Limits and Individual(k) Catch-Up Contributions:

1. Salary Deferral/Employee ( Pre-Tax defined as Traditional Deferrals, Post-Tax defined as Roth Deferrals)
2013 $17,500
2. Catch-Up Contributions Age 50 and Older (in addition to the above)
2013 $5,500
3. Employer/Profit Sharing Contribution (in addition to the above)
2013 25% of compensation
4. Overall (combination of deferral contribution and profit sharing) contribution limits:
For individuals under age 50
2013 $51,000
For individuals over age 50
2013 $56,500

 

Self-Directed Individual(k) Investment Options:

A self-directed plan enables you to invest your retirement funds when, where, and how you want. You have the ability to choose from a variety of investments, such as:

  • precious metals
  • mortgages
  • notes
  • real estate
  • private placements
  • and more.

By diversifying your investments, you will secure your retirement more efficiently.

Establishing an Individual(k) Plan is Easy:

  1. Download the Individual(k) Application Kit.
    Download the appropriate application above or call 1-877-742-1270 to obtain one directly.
  2. Complete the required documentation.
    Return your signed Individual(k) Application Kit to:
    New Direction IRA
    1070 W Century Dr, Suite 101
    Louisville, CO 80027
  3. Obtain a Tax Identification Number.
    You need a Tax Identification Number (TIN) for your plan. New Direction IRA can assist you in obtaining a TIN.
  4. Fund your account.
    You can either transfer funds from an existing Plan, or you can make a contribution. Our office can assist you in making sure that your contribution does not exceed the current limits.
  5. Select an investment.
    If you’re looking for investment ideas, visit the Investment Options Page.
  6. Purchase your investment.
    Direct New Direction IRA to purchase the investment with your plan.