Archive for November, 2006
Sep Ira Borrowing
November 5th, 2006
Question: I am out of work. I have a SEP-IRA. Can I borrow money from it tax free rather than just withdraw funds.?
Answer: No. You cannot borrow from a SEP-IRA or IRA, but you may be able to roll a SEP-IRA or IRA into a Solo 401k and then borrow from it.
For a Solo 401K, you may borrow up to 50% of your account balance (up to a $50,000 loan) and repay it over five years (or longer, if the loan is used to acquire a principal residence). Interest is paid back into your own 401k plan at around prime plus 1%. The interest paid is expressly nondeductible, regardless of the purpose of the loan.
Lou on Suze 09-13-08
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Sep Ira Withdrawal Tax
November 4th, 2006
Question: If I open a Solo 410K and a Roth 401K, are the Contribution limits separate or combined?
I am self-employed and have a SEP IRA. I am thinking of opening a Solo 401K and a Roth 401K. I want to convert the SEP into the Solo 401K. When I’m done I can reduce my taxable income with the Solo 401K and can have the Roth for tax free withdrawals at retirement. Are the Contribution limits separate or combined for these 2 401K accounts?
Answer: All 401k contributions must be treated as one big Contribution just as IRA accounts do. You can have many 401k accounts, but all your contributions must be added together.
The maximum Contribution to 401k is $16,500.
The maximum Contribution to IRA is $5000 ($6000 if you are 50 years old or older). The amount you can contribute to IRA could be reduced if you earn too much income. IRS publication 590 goes into full details on how much you can contribute into Traditional IRA or Roth IRA.
Stock Market Crisis causes IRA’s to Suffer for Safer Investments