The Basics of A 401(k)
A 401(k) is a profit sharing plan for businesses. This type of plan offers the highest contribution amounts available and offers employers flexibility in how the plan is structured.
401(k) plans are employer plans that can be written, to some extent, according to the employer's specifications. Employer choices include compensation types, Traditional and/or Roth designation, age groups, matching, age participation limits, etc. A 401(k) withdrawal (distribution) can be made without penalty after age 59.5. Required minimum distributions must be taken after age 70.5.
Some 401(k) plans are written such that the participant can elect "alternative" assets like real estate, gold, private equity, etc. and some are not. It depends on what the plan document allows. If you are a participant in a plan that does not allow the assets that you would like to have your retirement savings in, you may be able to perform a rollover if you are either no longer employed at the company that sponsored the plan or the plan allows an "in-service" distribution. You may rollover into a number of other retirement accounts such as a Traditional IRA, SEP IRA, Roth IRA (rollovers to a Roth may have a tax event associated with it), or even another qualified plan.
Rolling Over Your 401(k) – Keep the tax benefits and Invest in Alternative Assets
If you have retirement savings in a 401(k) at an employer for whom you no longer work or if that plan offers an “in-service distribution”, you can rollover those funds to a self directed IRA without a tax event. You get to keep the tax benefits, and you free that money up to invest in all the asset types that New Direction services. Many tax-advantaged plans are “portable” once the participant is no longer working for the company. Your 403(b), 457(b), defined benefit plan, money purchase plan, or other plan may also be allowed to roll over to an IRA without penalty or taxes. Feel free to call us for more information.
The Basics Of An Individual 401(k)
An Individual 401(k) plan is simply a 401(k) plan for companies with no employees. Individual 401(k) plans have the same options available to them as larger 401(k) plans. However, with an Individual 401(k), the employer, trustee, and participant are usually the same person.
For self-employed persons or companies with no qualifying employees, an Individual 401(k) plan allows the employer/participant high annual contribution limits as well as a high degree of flexibility and convenience when it comes to acquiring assets.
What Are the Benefits of An Individual 401(k)?
- A 401(k) plan provides employers flexibility and customization depending on the needs of the company and its employees.
- A 401(k) plan provides higher contribution limits than individual accounts like a traditional IRA.
- Tax benefits for the 401(k) participant and employer.
- 401(k)s can be used to invest in real estate, precious metals, private equity, publicly traded securities and more.
- You can make contributions even if you are over 70.5 (Must be employed).
- It can be a part of a generational wealth plan.
- If you leave your employer, you are allowed a 401(k) to IRA rollover. Similarly, you are allowed an IRA to 401(k) rollover.
Individual 401(k) Eligibility And Other Rules
- To be eligible for an Individual 401(k), you must be at or older than the age required by the employer, even if you are a full-time employee and receive other benefits. Eligibility rules change from company to company as each employer is able to customize the 401(k) plan.
- The Individual 401(k) is available for any sole proprietorship, partnership, limited liability corporation (LLC), or incorporated business, including sub-chapter "S" Corporation.
- The Individual 401(k) is used by owner-only and small businesses with no employees or if the employees fall outside of certain guidelines.
New Direction IRA Offers
Record Keeping - Download Record Keeping Documents
The trustee has an Individual 401(k) plan document and would like assistance with record keeping 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.
Learn more about 401(k) Contribution and 401(k) Distribution.
For more detailed information, feel free to contact us or visit IRS.gov.