Can my spouse rollover RA to my Solo 401k if my spouse doesn’t work in my self-employed business?

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The solo 401k plan, commonly referred to as self-directed Solo 41k is the retirement plan of choice for self-employed individuals or owner-only businesses including for the features highlighted below:

-The highest contribution limits for any defined contribution plan including up to $61,000 (or even $67,500 if you are 50 or older) for 2022, or $66,000 (or even $73,500 if you are 50 or older) for 2023.

-The ability to make pre-tax, Roth, and even Mega Backdoor Roth contributions.

-401k participant loans of up to $50,000

-Invest with checkbook control in real estate, cryptocurrencies, notes, private placements, and other types of alternative investments.

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If you are self-employed and have a Solo 401(k) retirement plan, you may be wondering if your non-working spouse can rollover their IRA into your Solo 401(k). The answer is not straightforward, as there are certain rules and regulations to consider.

In general, the IRS allows for the rollover of funds from an IRA into a Solo 401(k) if the individual is eligible to participate in the 401(k) plan. For self-employed individuals, the plan is typically established for the business owner and their spouse if they are employed by the business. However, if the spouse does not work in the self-employed business, they may not directly contribute to the Solo 401(k) plan.

In order for a non-working spouse to rollover their IRA into their spouse’s Solo 401(k), the working spouse must have the plan set up to allow for spousal contributions. This means that the plan document must explicitly state that the spouse, even if non-working, is eligible to contribute to the Solo 401(k) plan.

Additionally, the non-working spouse must have a traditional IRA or a rollover IRA from a previous employer’s retirement plan in order to be eligible for the rollover. Roth IRAs and employer-sponsored retirement plans such as 401(k)s or 403(b)s are generally not eligible for rollovers into a Solo 401(k).

If the plan allows for spousal contributions and the non-working spouse has an eligible IRA, the rollover process is relatively straightforward. The non-working spouse would need to initiate a direct rollover from their IRA custodian to the Solo 401(k) custodian. It is important to ensure that the rollover is completed as a direct transfer to avoid any tax implications.

Once the funds are rolled over into the Solo 401(k), they will be subject to the same rules and regulations as the working spouse’s contributions. This means that the funds will be subject to the same investment options, distribution rules, and tax treatment as the working spouse’s contributions to the plan.

It is important to note that the IRS regulations regarding spousal contributions to Solo 401(k) plans may change, so it is always advisable to consult with a qualified financial advisor or tax professional before initiating any rollovers or contributions.

In conclusion, if you are self-employed and have a Solo 401(k) retirement plan, it is possible for your non-working spouse to rollover their IRA into your plan if certain criteria are met. Be sure to review your plan document and consult with a professional to ensure that the rollover process is done correctly and in compliance with IRS regulations.