Solo 401(k) Distribution
- Taxed as ordinary income for the tax year of the distribution.
- 10% penalty if distributed before age 59.5 unless exception is met.
- Distributions optional between ages 59.5 and 70.5
Solo 401(k) Minimum Distribution Rules
At age 70.5, Required Minimum Distributions
begin. The account holder must begin taking an annual distribution by April 1st of the year after he reaches 70.5 years of age.
- The required minimum distribution is calculated by dividing the fair market value of the IRA as of December 31st of the prior year by the life expectancy of the IRA account holder as found on the IRS's Uniform Life Tables.
In-service withdrawals may be allowed on a plan-by-plan basis.
- In-service distributions must only be made from Employer contributions (this is IRS rule).
- In-service distributions of employee $ is allowed after 59.5 even if plan does not allow it (again, IRS rules).
- Max 50% of plan balance or $50,000 (no restriction on if it is employee or employer money)
- Must be fair interest rate, paid monthly and paid back in 5 years (or 30 years if used to buy first home).