Starting a solo 401k with IRA Rollover Funds

BACKGROUND: I have recently started my own LLC and I have made a little money so far and I am very interested in starting a solo 401k in hopes of being able to put away more money as I begin making more profits.  Prior to my own business start-up, I worked for an employer and when I left, rolled my 401k into an IRA.  I am very intrigued by the solo 401k in order to do real estate investing from it.  My questions are:

QUESTION 1 – My current financial adviser who is managing my IRA says he has never heard of rolling over money from an IRA into a 401K and is not sure if it is possible without penalties.  Based on what I read on your website, since I do not have a SEP or SIMPLE IRA, this appears to be possible.  Is this correct?

ANSWER: Just like a 401k workplace retirement account can be transferred to an IRA, which is what you did with your former employer 401k, the IRA rollover rules also allow for the movement of an IRA to a qualified retirement plan such as a solo 401k. Click here for more information on the IRA to 401k rollover rules.

QUESTION 2 – If I do pursue this, then do I need to liquidate the funds I have in my IRA in order to move them over?  I have money in annuities which my adviser says can’t be liquidated without a 9% penalty for 9 more years.  Can this move over and be held in my solo 401K without being liquidated?  I have other money in stocks which I could liquidate, penalty free, to have cash available for my real estate investing.

ANSWER: Yes the annuity can be transferred in-kind to the solo 401k instead of liquidating it and transferring the proceeds. However, you still won’t be able to liquidate the annuity until the surrender period has expired.

Thank you in advance,

James in Ohio

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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