Compare Retirement Accounts

Determine which self-directed retirement account is best for your needs.

This quick  guide will help you decide which retirement account you qualify for and best fits your needs.

ROBS 401(k)

Solo 401(k)

IRA LLC

 

Key advantages

  • For entrepreneurs who want to use their retirement funds to finance their existing or new business tax and penalty free.
  • The business owner(s) can draw a fair salary.
  • SBA Loans and bank loans can also be incorporated.
  • Allows for 401k loan and investing in alternative investments such as real estate, metals and notes.
  • Allows for after-tax solo 401(k) contributions as well as Roth 401k contributions.
  • Investments can be made by writing a check or by wire.
  • The solo 401(k) owner serves as trustee and thus makes all investment decisions.
  • The solo 401k  owner chooses where to hold the solo 401k funds.
  • Both spouses can participate in the same solo 401(k) plan.
  • For those who do not qualify for a solo 401(k) but still want to invest in real estate.
  • The LLC manager controls the funds and places investments by check or wire.
  • Greatly limits IRA custodian fees and investments can be placed more quickly since the LLC manager places the investments.

Businesses who can provide this retirement plan

  • Any business setup as a C-Corporation that offers goods or services.
  • Owner-only businesses including both spouses with no common-law employees.
  • Contractors.
  • Individuals who have earned income.

Employee eligibility and minimum coverage requirements

  •  Employees can choose to participate if they’re 21, have worked one year and 1,000 hours.
  • No full-time common-law employees. Otherwise, no age or service restrictions.
  • None

Funding responsibility

  • Once plan eligibility has been met, employee salary reduction contributions and/or employer contributions.
  • None. Business owners can contribute as employer and/or employee.
  • None. IRA holder can make contributions from W-2 income or earned income.

Contribution options

  • Employer can decide whether or not to make profit sharing contributions from year to year.
  • Business owner can contribute as employer and/or employee.
  • IRA holder can make contributions from W-2 income or earned income.

Employer contribution limits

  • For the 2017  tax years, up to 25% of the participant’s compensation or a maximum of $54,000, whichever is less.
  • Contributions are deductible as a business expense and aren’t required every year.
  • For the 2017 tax year, overall employer plus employee contribution limit is 100% of compensation with a maximum of $54,000
  • None

Employee contribution limits

  • $18,000 for the 2017 tax year ($24,000 for employees age 50 or older).
  • Contributions are not required each year but discrimination testing may apply.
  • $18,000 for the 2017 tax year ($24,000 for employees age 50 or older).
  • Contributions are not required each year.
  • For tax year 2017 $5,500

Investment choices

  • Employer stock
  • Alternative investments such as real estate, metals, notes, and tax liens to name a few. Equities such as mutual funds and stocks.
  • Alternative investments such as real estate, metals, notes, and tax liens to name a few. Equities such as mutual funds and stocks.

Withdrawals, loans, and payments

  • Certain distribution triggering events apply (e.g., retirement, age 59 1/2, in-service of rollover funds). Federal income taxes and a possible 10% penalty if the participant is under age 59½.
  • Allows for 401k participant loans.
  • Certain distribution triggering events apply (e.g., retirement, age 59 1/2, in-service of rollover funds). Federal income taxes and a possible 10% penalty if the participant is under age 59½.
  • Allows for solo 401k participant loans.
  • Can’t take  loans but can take distributions prior to reaching age 59 1/2, but federal taxes apply as well as a 10% early distribution penalty if under age 59 1/2.

Employer’s responsibilities

  • Must adopt a plan that allows for investing in employer securities.
  • IRS reporting required, such as Form 5500.
  • Must adopt a plan that allows for investing in alternative investments.
  • IRS reporting required, such as Form 5500-EZ once plan asset value reaches $250,000.
  • Provide total value of LLC to IRA custodian for issuance of Form 5498.
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