Are there any changes to the 401(k) plan and IRA rules this year (and going forward)?
Yes. The most significant change that no one seems to be paying attention to is the brand new “in-plan” Roth conversion rules. In the past, clients with 401(k) accounts with their current employer had very limited options for moving pre-tax 401(k) funds into post-tax Roth 401(k) accounts. For example, in the past, a 50 year old corporate employee who had $200,000 in her 401(k) account could not convert some or all of the account into the plan’s Roth component. However, many clients would like to convert at least some of their account into post-tax funds (and, of course, pay the tax associated with the Roth conversion) in order to create a pool of pre-tax and post-tax retirement funds. That type of planning is now possible, with the end result of more income tax flexibility in retirement years.
Advantages for Self-Employed
Those who are self-employed have even more flexibility. They are eligible for Individual 401(k) Plan, which is a type of Qualified Retirement Plan designed specifically for the self-employed individuals or small business owners with out any full time workers in the business or company. Some of the advantages of the Individual 401(k) Plan are significantly higher contribution limits (up to $56,500 in the year 2013), ability to make after tax (Roth) contributions to the plan as well as converting pre-tax retirement dollars into after-tax (Roth sub-account), loan option which allows plan participant to have quick, easy and inexpensive access up to $50,000 (or 50% of the plan balance, whichever is less). Also, one of the main advantages of the plans offered by Sense Financial is the “Checkbook Control”, which puts the plan participant into the driver’s seat, eliminates custodian fees and delays associated with the custodian, allowing making investment transactions as simple as writing a check.