QUESTION: I have a potential investment that I am thinking of using my Solo401k to invest in, but it has potential to increase my investment many times in a few years (if it works anyway) and thus I would long term face paying taxes on all that increase when I eventually withdraw from the 401K. Is there a way to structure my 401k, or some of my solo401k monies, to be a Roth 401k and have the same benefits of self-directed investing, just under a Roth?
ANSWER: You can process an in-plan Roth 401k conversion and pay the taxes now on the conversion amount. Subsequently, the investment is be made using Roth 401k funds and the earnings will grow tax free. To learn more about the in-plan solo 401k Roth conversion rules, visit the following links. We can then assist with the in-plan Roth 401k conversion reporting including issuing the 1099R to the IRS.
Jim in Evansville, Indiana