If you’ve decided to venture off on your own after leaving your former employer (day job) and are now self-employed, you may want to consider transferring your former employer 401k to a Solo 401k (also known as individual 401k, self-directed solo 401k). Transferring your former employer 401k to solo 401k is just one of the options available for funding solo 401k.
Once your solo 401k is funded, you can get creative with it. For example, you can borrow from solo 401k for any purpose such as for helping build or keep your self-employed business afloat, personal use, and for purchase of primary residence, to name a few. Put simply, you can use the borrowed funds for any purpose. To learn more about Solo 401k loan visit:http://mysolo401k.net/Solo401kLoan.html
Here’s what transferring your former (old) employer (company) 401k to solo 401k entails:
Generally you will use your former employer’s forms for transferring 401k to solo 401k as 98% of the time the former employer requires that you complete their transfer forms, which will have transfer, direct rollover options.
Your solo 401k provider will assist you in filling out transfer forms but typically they are self explanatory.
When filling out 401k transfer forms, just make sure not to elect distribution option as it will subject your account to 20% mandatory tax withholding whereas a transfer or direct rollover, of course, will not be taxable but only reportable on form 1099-R under code “G” in box 7. You then report direct rollover/transfer to IRS when you file your Form 1040 with IRS the following year. Solo 401k providers such as mysolo401k.net will be happy to assist you with properly reporting 401k transfer rollover to solo 401k.
Only in very limited cases will your former employer require your new solo 401k provider to prepare 401k transfer/direct rollover form. No problem as most solo 401k providers including Mysolo401k.net are happy to prepare 401k transfer/direct rollover form.
Lastly, whether your use former employers 401k transfer forms or new solo 401k provider’s forms to transfer 401k or TSP to solo 401k, make sure that the check is made payable to the solo 401k not just your name.
Here’s an example of how transfer/direct rollover check from former 401k or TSP should be made payable in order to avoid adverse tax consequences: XYZ SOLO 401K TRUST, JANE DOE, TRUSTEE
Wells Fargo Former Employer 401k Transfer QUESTION:
I am ready to fund my solo 401k plan via a transfer from a my former employer 401k which is held at Wells Fargo. How do I get the transfer form to request the non-taxable 401k transfer?
ANSWER:
You would get the form from Wells Fargo since we are not listed as an authorized party on your former employer 401k plan. When you call Wells Fargo, please let them know that you’d like to do a rollover, and you need the proper forms. Once they give you the forms, please send the forms to us and we will complete the majority of the form for you, and help you with the transfer. We would be happy to call Wells Fargo with you as well to explain to the representative what you are trying to do. Please just let us know if you would like our assistance on the call, as well as the best day and time for the call. Please let us know if you have any questions.
Spouse Former Employer Rollover QUESTION:
ANSWER:
Yes provided that the spouse with the W-2 job is also working in the self-employed business (including reporting self-employment activity on his or her taxes) and provided that the employed spouse is eligible to rollover funds from the existing retirement account (for example, if the existing retirement account is at the employed spouse’s current 401(k) plan he or she is not likely to be able to rollover the money until the employed spouse leaves his or her job).
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