Nondeductible IRA Contributions | Transfer IRA to Solo 401k Plan

QUESTION: I am trying to see how I can get as much money as possible into this solo 401k plan quickly. I think I can qualify for a non-deductible IRA for 2012 and 2013. I then plan to transfer the IRA funds to the solo 401k.
For this year in the solo401k can I do the following?

1) Transfer my Fidelity Traditional IRA and rollover IRA consisting of former employer 401k funds.

2) Put in 100 % of my self employed profit (about $12000 ) into the solo 401k.

3) Roll over my nondeductible  IRA that I can qualify for.


Allen C. in Georgia

ANSWER:  If you decide to make a nondeductible IRA contribution for this year and last year, don’t forget to file form 8606 with the IRS. This form only applies to nondeductible IRAs and must be filed each year with your personal tax return. This is how you and the IRS keep track of after tax IRA contributions.

The rules do not  permit the transfer of nondeductible IRA basis to a solo 401k because they are deemed after-tax funds similar to a ROTH IRA which also cannot be transferred to a solo 401k plan. However, if the full non-deductible IRA is closed, with the basis converted to a Roth IRA and the gains transferred to the pretax solo 401k,  you can then convert the pretax funds to a Roth solo 401k.

With respect to transferring your Fidelity traditional and Rollover IRA funds, both may be directly rolled over to a solo 401k plan.  Lastly, provided the $12,000 of above is net income from self-employment, you can plug the above figure using our solo 401k contribution calculator to determine your true solo 401k contribution amount.

About Mark Nolan

Each day I speak with energetic entrepreneurs looking to take the plunge into a new venture and small business owners eager to take control of their retirement savings. I am passionate about helping others find their financial independence. Having worked for over 20 years with some of the top retirement account custodian and insurance companies I have a deep and extensive knowledge of the complexities of self-directed 401ks and IRAs as well as retirement plan regulations. Learn more about Mark Nolan and My Solo 401k Financial >>


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