Frequently Asked Questions
What is a “STRIP Plan”?
A Self-Trustee Retirement Investment Plan (STRIP Plan), is more commonly known as a Solo 401K, self-directed 401K, or checkbook 401K. The Strip Plan is an IRS approved 401K Profit Sharing Plan that allows the self-employed, or small business owners to save for retirement via a traditional 401K, Roth 401K, and a Profit Sharing Plan. Most importantly, the STRIP Plan allows individuals to invest in alternative assets like real estate, precious metals, or promissory notes.
What are the key differences between a STRIP Plan and a Self-Directed IRA?
|Deductible Contribution Limits (2016)||53K—under 50
|Borrow up to $50K w/no FEES||YES||NO|
|Debt Finance real estate w/NO tax consequences (UBIT)||YES||NO|
|Own Life Insurance||YES||NO|
|Be your own trustee; write checks and directly control your retirement funds?||YES||NO|
|Asset Protection?||YES Creditors cannot touch||Some Protection|
My CPA/attorney/financial advisor hasn’t heard of a 401K profit sharing plan? What should I do?
It’s not uncommon for advisors to never have heard of profit sharing plans. We have worked with many professional advisors across the country to educate them regarding 401K profit sharing plans rules so they can give good financial advice to their clients.
Why should I open a 401(K)?
The 401(K) is attractive to employers and employees because of the high contribution limits and large tax deductions available. Plus, you have the ability to truly self-direct investments in traditional and non-traditional assets. Two components comprise the maximum 401(K) plan contribution:
- An employee salary-deferral contribution: In 2016, the employee can contribute up to $18,000 annually through salary deferral, although this may not exceed 100 percent of the employee’s pay.
- An employer profit-sharing contribution: The annual limit for this is 25 percent of the employee’s pay.
The total annual contribution limit is $53,000 in 2016. However, under a “catch up” provision, individuals age 50 and over may contribute $6,000 in 2016 allowing a total contribution limit of $59,000.
What do I need to know about 401(K)s?
The 401(K) is a savings plan that allows employees to set aside tax-deferred income for retirement. In 2016, they can contribute up to $18,000 annually if they’re under 50 or $24,000 if they’re age 50 or over. A 401(K) is truly self-directed, allowing participants to invest in both traditional and non-traditional assets.
Is a STRIP Plan for everyone?
Self Trustee Retirement Investment Plans (STRIP) are not for everyone. They are for those who want to create wealth by using their knowledge of investing in assets other than stocks, bonds and CDs.
What are the benefits of a STRIP 401(k)?
In addition to the tremendous 401(K) benefits (tax-free profits, tax deductions, asset protection and estate planning), with a solo 401K (or STRIP 401K) you can invest tax-free in investments that you know and understand, which through the power of compounding interest, can create additional wealth for you and your family.
Why haven’t I heard of a STRIP 401(K) before?
While the concept of investing in real estate and other assets in retirement plans has been around for more than 30 years, it hasn’t received a great deal of attention. Why? Most custodians that offer 401(K)s (banks and brokerage firms) focus on mutual funds and CDs, because they have vested financial interests in having you select those investments from them. Because a majority of custodians focus on stocks and CDs, there is a common misconception that these are your only investment options for retirement plans. But this is not the case.
Are STRIP 401(K)s allowed under IRS rules?
Yes, as long as you follow relevant rules. IRS Publication 560 and 590 clearly state the rules and regulations governing IRAs and qualified retirement plans.
Can I rollover cash and assets from other retirement plans?
Yes, you can roll both cash and assets into the STRIP Plan.
Can I use existing retirement funds to help pay for the STRIP Plan?
Yes!! We can show you how.
Are there any limits on how much I can roll into my STRIP Plan?
No, there is no limit.
How long have Self Trustee Retirement Plans been around?
These types of plans were established in 1974.
Do I really have checkbook control of my own retirement investments?
Yes. You will literally have a checking account at a bank of your choice.
Are there any IRS requirements I need to be aware of?
Yes. If your STRIP Plan account is valued at $250,000 or more, you may need to file form 5500 (we will help you file if needed).
Do I get ongoing support to help me manage my STRIP Plan?
Yes. We provide ongoing support, education, advice…whatever is needed. Contact us to learn more.
How can I be sure that my investment is allowable in a STRIP Plan?
IRS Publications state what investments are prohibited in Qualified Retirement Plans. These investments include artwork, stamps, rugs, antiques and gems. All other investments, including stocks, bonds, mutual funds, real estate, promissory notes, foreclosures, and tax liens are acceptable as long as IRS rules governing retirement plans are followed.