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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4025
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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Hello, I am considering rolling over my traditional IRA account

Resolved Question:

Hello, I am considering rolling over my traditional IRA account into a **SOLO** 401K, in order to put some of the funds into precious metals, and store them nearby (like a bank safety deposit box). I haven't formally started a business yet..could I start the business and the solo 401K account at the same time? Or would the business have to be up and running beforehand? (How do I "announce" the business?) Also: would the IRS disqualify the solo 401K (within 3 to 5 years, or sooner) if the business isn't making any money? If so, would they consider the metals purchase to be a "distribution", then nail me for penalties? Thanks.
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

NPVAdvisor :

hi i can help with this

NPVAdvisor :

Solo (or individual) 401(k)s can be opened by sole proprietors, so you don't have to incorporate

NPVAdvisor :

What the custodian may require is a DBA, or some other entity showing that there is a business in place

NPVAdvisor :

Just to show you how easy it can be ... here's Fidelity's do-it-yourself setup:

NPVAdvisor :

Appoint a Plan Administrator—someone who takes care of administrative responsibilities and ensures the plan is operating according to the Plan Document.


Because a Fidelity plan is easy to maintain, the employer usually acts as the Plan Administrator. You may also name another person at your firm, or your accountant, as the Plan Administrator. Learn more about the duties of the Plan Administrator.



  1. Download, print, and read the Fidelity Retirement Plan, Basic Plan Document No. 03 (PDF).

  2. Download, print, and read the Self-Employed 401(k) Adoption Agreement (PDF).

  3. Complete and sign the Adoption Agreement in Step 3 and return the original form to:

    Fidelity Investments
    PO Box 770001
    Cincinnati, OHNNN-NN-NNNN




Once you have opened the plan, you are ready to establish your accounts.

NPVAdvisor :

Now, contributions will be an issue because there has to be self employment income, but doing a rollover from a traditional IRA is fine, since PPA 2006

NPVAdvisor :

Why don't you just use a self directed IRA?

NPVAdvisor :

Here's a company that specializes in precious metals IRAs

NPVAdvisor :

Looks like you stepped into the chat but then back out ... are you there?

NPVAdvisor :

While I'm waiting for you, I'll link some things that might be helpful ... here's the IRS' rollover chart that shows what kind of plans can be rolled into each other

NPVAdvisor :

.

NPVAdvisor :

.

NPVAdvisor :

In terms of your question about the business being up and running?

Customer:

Hi, there are problems with self-directed IRA: if SDIRA and no LLC, the metals have to be trucked off to Delaware or some other depository...I want to keep the metals nearby. If I do SDIRA with a LLC, I can keep the metals nearby, but then California nails me for a $800 franchise tax.

NPVAdvisor :

All that matters is that you establish a business (DBA, LLC, sole proprietor), being successful isn't an issue, you just have to have income to make ongoing contributions (but rollovers are different)

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1:36 PM


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Customer:

I would do the rollover to establish the solo 401k, then run the business to hopefully continue to make contributions

NPVAdvisor :

Yep

NPVAdvisor :

except you need to establish the plan fig to roll intorst, so there'll be somethin

NPVAdvisor :

sorry establish the plan "first"

Customer:

correct, I would establish the plan, and do the rollover, with one of the places that sets up solo 401k plans

NPVAdvisor :

right

Customer:

to establish the business, do I register with my city?

NPVAdvisor :

again, Fidelioty, schwab, many will set up the 401(k)

NPVAdvisor :

what state are u in?yo

NPVAdvisor :

sorry for the typos ... what state?

Customer:

I am in California.....but the problem with Fidelity and Schwab is that they won't do gold and silver, just stiocks and bonds

NPVAdvisor :

Right, my recommendation would be to use the IRA for the metals ... much more common

NPVAdvisor :

then contribute to your 401K when you're profitable

NPVAdvisor :

than ...

NPVAdvisor :

if you want to, roll the money out to an IRA to buy more precious metals

Customer:

okay, but again, in CA, have to pay $800 per year just to keep the metals close by

NPVAdvisor :

precious metals in 401(k)s is very uncommon

NPVAdvisor :

Did you take a look at the IRA I linked?

NPVAdvisor :

hand on a sec

NPVAdvisor :

"hang" on a sec ... let me see if they'll custody it at your choice of location

Customer:

Hi, I take it you mean the IRA with Kitco?

NPVAdvisor :

Check this out: (hope it formats OK)

NPVAdvisor :

o qualify for inclusion in your IRA or 401K, a precious metal product must be manufactured by a recognized national mint. Products of a certain specified purity level are also allowed if they are made by refiners that either have ISO 9001:2008 certification or are named on an industry-standard “Good Delivery” list.


Kitco offers a very wide range of products that meet these requirements. For your IRA or 401K, you can choose from among the following.


















Gold

Silver

Platinum

Palladium

American Eagle coins


Canadian Maple Leaf coins


Austrian Philharmonic coins


Gold bars from various recognized refiners




American Eagle coins


Canadian Maple Leaf coins


Austrian Philharmonic coins


Kitco Signature Silver Products


Silver bars from various recognized refiners




American Eagle coins


Canadian Maple Leaf coins


Isle of Man Noble Coins


Platinum bars from various recognized refiners




Canadian Maple Leaf coins


Palladium bars from various recognized refiners











As a leader in the precious metals industry, Kitco aligns itself with other expert companies to offer superior products and services to our customers. Kitco has established relationships with some of the most highly reputed, market-leading IRA custodians. Our customers can set up their precious metal IRA accounts with any of the following companies:


Sterling Trust Company
Established in 1974, the Sterling Trust Company, a division of the Equity Trust Company, is a leader in the self-directed retirement plan industry. Sterling Trust and its affiliates provide services to over 110,000 individuals and businesses nationwide with approximately $8 billion in assets under custodial and retirement administration. Sterling Trust is strictly regulated by state and federal regulators and is subject to Internal Revenue Service and U.S. Department of Labor regulations.


GoldStar Trust Company
Originally incorporated as the Colonial Trust Company in 1989, the GoldStar Trust Company is a trust branch of the Happy State Bank. Being part of a Texan bank, the company and its financial standing are closely monitored by the Texas Department of Banking and the Federal Deposit Insurance Corporation. GoldStar’s financial robustness, high-quality service and comprehensive range of retirement services have helped make it one of America’s leading trust companies.


New Direction IRA, Inc.
New Direction IRA is a trusted provider of investor education and recordkeeping services for retirement accounts. We enable individual investors to take control of their tax advantaged retirement funds using alternative asset opportunities that are ideally suited to each investor’s retirement goals and investment style. Investors, advisors and asset providers choose New Direction because of our depth of experience in retirement asset acquisition (opportunities), specialized education offerings and proven track record of reliable transaction funding and thorough asset documentation. Call us today at877-742-1270.


Provident Trust Group
Provident Trust Group, LLC is a full-service trust company, licensed and bonded for the purpose of administering custodial services, especially self-directed retirement plan administration. With full ERISA and IRS code compliance, Provident administers the accounts of over 10,000 clients with an emphasis on security, privacy and transparency. Its asset depository services help investors diversify beyond traditional investments and allow them to work directly with their advisors, agents and brokers.


NuView IRA, Inc
NuView IRA, Inc. is a self-directed IRA administration company that specializes in holding alternative investments within retirement plans. The company follows strict compliance requirements set forth by its custodial bank and the Kansas Department of Banking. The safety and security of its customers' accounts is a top priority for NuView IRA. Believing that personal service and client education are the true keys to success, NuView IRA offers hundreds of classes each year to educate people on the investment choices available for retirement plans. The company has a dedicated client services team to assist people with unlocking their IRAs to access wider investment choices.


Sunwest Trust
Sunwest Trust, Inc. began in 1987 as a small escrow company. In 2003, Sunwest Trust, Inc. received its trust powers, becoming the only company in New Mexico with the ability to act as both an escrow agent and a custodian for IRAs, with a special focus on self-directed IRAs. Sunwest currently services over 5,000 owner financing contracts and acts as custodian for over 5,000 IRAs with a combined value of over 1 billion dollars.


American Estate & Trust
American Estate & Trust, LC (AE-Trust) is a licensed trust company that is regulated and examined by the Nevada Financial Institutions Division. The company provides custodial and administrative services for IRAs, 401(k)s, health and educational savings accounts and pooled investment funds. AE-Trust is an Accredited Business and member in good standing of the Better Business Bureau, with no complaints having ever been lodged against the firm.


Self Directed IRA Services
Texas-based Self Directed IRA Services, Inc. (SDIRA Services) was founded in 2008 as a wholly-owned subsidiary of Horizon Bank (established in 1905). SDIRA Services provides administration and custody of alternative and traditional assets (precious metals, real estate, trust deeds, mortgages, tax liens, promissory notes, etc.) in self-directed IRAs of all types. The company’s mission is “to provide the highest level of customer service, attention to detail and dedication” to its clients.


The Kingdom Trust Company
The Kingdom Trust Company was established in 2010 as a South Dakota chartered Trust Company to provide custodial services to investors who wish to diversify their retirement accounts and hold both traditional and non-traditional assets. The Kingdom Trust Company also accepts Perth Mint certificates for placement in self-directed IRAs. Kingdom was started by seasoned self-directed industry professionals who are committed to providing personal service to customers. The company’s philosophy is that customers ought to be more than just account numbers. As such, the company assures its customers of speedy, accurate and courteous service.


Next Generation Trust Services
Next Generation Trust Services, LLC, based in Roseland, New Jersey, specializes in comprehensive account administration and support services for self-directed retirement plans, which clients control as they build wealth through the alternative investments allowed in these accounts.

Next Generation offers education and guidance about self-direction as a retirement strategy and the support needed to maintain these accounts. Next Generation holds the funds, provides administrative assistance, and files and manages all mandatory paperwork pertaining to the transactions for individuals who are making their own direct investments. For more information, contact Next Generation at 973-533-1880 orinfo@NextGenerationTrust.com.



Customer:

OK thanks, XXXXX XXXXX check them out one by one, but everyone I have spoken with so far wants to ship the metals to delaware.

NPVAdvisor :

I think this is probably your best bet ... but there are others

Customer:

so you are discouraging me from the solo 401k model completely, is that correct?

NPVAdvisor :

No, not at all... they're wonderful .... It's just that you have to find a custodian that will (1) handle the metals ... (which I think what I just shoed you accomplishes) and ...

NPVAdvisor :

(2) will set up the 401(k) with no real business history (again, most will do part 2 as long as you set up the but BOTH may be an issue

Customer:

but the problem with ALL of them is that CA nails the taxpayer $800 per year just to store metals close by "the privelige of doing business in CA"

NPVAdvisor :

it's just that having it in the 401(k) is NO different than an IRA AND, you can do the IRA right now without settying up the business

NPVAdvisor :

I see

NPVAdvisor :

Hang with me a minute and let me see if I can find a custodian that's close to you .... what city? or part of CA?

Customer:

from everything I have seen, the solo 401k DOES allow precious metals and other alternative investments, and keep the metals nearby,m and with checkbook control, maybe $1200 or so set up fee

Customer:

Sacramento, CA

NPVAdvisor :

Ok hang on

NPVAdvisor :

Are you close to San Carlos?

Customer:

yes, san carlos is fairly close

Customer:

I know the company you are thinking of....they will only ship the metals to delaware

Customer:

but what about the potential IRS issues I mentioned with the solo 401K? you think that would be a problem?

NPVAdvisor :

There are no problems there ... If you establish a 401(k) and roll something into it and then the business goes belly up or never gets off the ground it just sits there

NPVAdvisor :

You custodian MIGHT want you to roll it back into an IRA after a period of inactivity

NPVAdvisor :

but believe me it's only when you want to DISTRIBUTE, pull money that that you start haveing any issues with IRA ,,,, and then it's only ... pay the tax

NPVAdvisor :

(and penalty if you're under 50 and 1/2_

Customer:

you mean the solo 401k just sits there....until I close it? The IRS won't force me to roll it back to the IRA? Also, I think with solo 401K, no custodian, just the trusee (me) if I have that right.

NPVAdvisor :

no there has to be a custodian (bank, broker, insurance company, trust companyld be the trusteeou wou) y

NPVAdvisor :

All those folke that were listed aboveare custodians

NPVAdvisor :

sorry YOU would be the trustee

Customer:

I see, I guess the company that does the set up provides the custodian.

NPVAdvisor :

yes, they essentially are the custodian

NPVAdvisor :

for example Fidelity uses Fidelity trust company

Customer:

I'm 57 now, so would only have to cool my heels for another 2.5 years until I turn 59.5

NPVAdvisor :

There ya go

NPVAdvisor :

some brokers use one of the banks (Delaware charter is an example) that serves only as custodian for lots of brokers

Customer:

I see.........so being that I'm 57 already, I should not expect any real problems from the IRS in the next 2.5 years or so, if the business is a bust?

NPVAdvisor :

Sure and then, you will only hear from tham at age 70 and 1/2 when they want you to start pulling it out so they can finally get those taxes

NPVAdvisor :

No problems

Customer:

got it, thanks,......the other possible format is "self-directed IRA with a trust", are u familiar with that setup?

NPVAdvisor :

They're only concerned with distributions ... causes no 1099 ... they will never eve be aware of it unless/until you start making contributions (then it shows up on your W-2)

Customer:

I see, thanks.

NPVAdvisor :

thats exactly what these people are doing ... all IRAs and quzalified plans use trusts (that's the custodian)

NPVAdvisor :

the trust is part of the bundle

NPVAdvisor :

that's why there's a trustee

NPVAdvisor :

you arfe the trustee of the trust

Customer:

got it, thanks

NPVAdvisor :

No problem I've been doing qualified plans for 25 years ... love talking about it

NPVAdvisor :

the CRPS you see is Chartered Retirement Plans Specialist

NPVAdvisor :

you should bookmark this page ... lots of good links to go back through

Customer:

for my purposes, the solo 401k might be the best way to go: allows alternative investments. checkbook control, keep precious metals close by, as long as no issues with IRS, it should work....if I wasn't in rip off california, would do self directed IRA LLC

Customer:

If I click on "save and exit" below, does that save the chat to a file?

NPVAdvisor :

yes, but again, the IRA does as well .... just doesn't allow for the add-on of contributing from salary later

NPVAdvisor :

I would copy and past to a word file

NPVAdvisor :

It will stay in the system here forever ... just be sure to bookmark it

Customer:

good idea, thanks.....okay I will give you "good service"

NPVAdvisor :

Also, if you would ...

NPVAdvisor :

 


Positive Feedback of an “OK” or better (or an “Accept”) would be appreciated. That’s the ONLY way we experts are paid!


 


However, if you need CLARIFICATION, please COME BACK here, AND feel free to bookmark.


 

NPVAdvisor :

Thanks so much

Customer:

Thanks again, have a good day

NPVAdvisor :

You too good luck wiith everything

Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4025
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and 5 other Tax Specialists are ready to help you
Expert:  Lane replied 1 year ago.

Thanks for the rating Earl.


To ask for me again, say “For NPVAdvisor” at the beginning of your question

OR

Go here: NPVAdivsor … and enter your question in the box.

Thanks again,

Lane

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