I am a sole proprietorship s-corp with a 5305 SEP IRA that has been open for several years. I am trying to transition to a solo 401K in 2024, but have already contributed to my SEP IRA for 2024. From what I understand, it is now possible under the Secure Act to transition between plans in the same calendar year, but you cannot have both types of accounts open during the same calendar year, so I will need to terminate the SEP IRA. What do I need to do / consider in terms of transitioning any contributions already made under the SEP IRA to the Solo 401k before the December 31 deadline for solo 401K contributions?
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Notify the financial institution that you will no longer be contributing to the SEP-IRA and that you want to terminate the plan and set up a 401K plan. You can rollover your Sep balance to 401K but not make contributions to both in the same year.
Thanks for the reply. A follow-up question. Given what you said above, since I have already contributed to the SEP IRA in 2024, that makes me ineligible to contribute to the Solo 401k this year. So, should my plan be to maximize contributions to the SEP IRA for 2024 and then start fresh with the Solo 401K in 2025?
Yes, but please consult your financial advisor to make it a smooth transition to 401K.
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noranoone
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princess1231
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