401k Strategies that will Blow your MIND

Foreign. Welcome, everybody, to this week's podcast and the Main Street Business podcast. Excited to be here with you. My name is Mark Kohler. I'm here with the illustrious Matt Sorensen. That's a. That's a new adjective.

Yeah. Thank you. I'll take it. I'll take it. I've been called worse. Well, I'm excited to be here. We're talking about a huge topic about how to get the most out of your 401k. This is the retirement account many of us have, as we are we experienced as an employee at a company, or maybe even if you small business owners that want to do it for yourself. So we're going to dive into this and talk about how to get the most out of the 401k.

And I loved the title because maybe I chose the title 401k strategies that will blow your mind. So if you're catching us on YouTube or you're a regular podcast listener, either format. Grateful you're here. We hope to wow you today. And we're going to go through the fundamental basic strategies and kind of build upon each one until we blow your mind. Now, your mind might be blown earlier on than others, or you may have to wait for the very end. I don't know. We'll see how it goes.

Everybody's mind blows at a different spot. Yeah, we're not on the same spectrum of mind blowing. All right, some of you.

Yeah. And now one thing we're trying to do better in our podcast is get into the topic here, hit some base hits right out of the gate, and then, you know, throw in a little spattering of some insightful jokes and commentary that we think are a huge part of this wonderful tax and legal podcast. Yeah, that's our plan. Right. I want to make sure we're on the same page. Okay.

Yeah. So in other words, don't make any jokes right now, Matt. Save those for later.

Got it. All right, basics number one. You want to choose basic number one?

Yeah. Let me say 401k. Okay. Here's my basic is a 401k has to be created by a business or an employer. So, like, IRAs are individual accounts. Like, congratulations, you're an individual, you can have an IRA. But 401ks, if you're just an individual, you can't go set up a 401k. A business has to create it for you. So think of Dunder Mifflin. You know, Dunder Mifflin has their 401k plan. Dwight Schrute couldn't go just set up a 401k plan for himself. Maybe he could have done it in shrewd farms. We'll come back to that. But you know, Michael Scott, Michael Scott couldn't even do a, a 401k.

Right.

The company has to create it for the benefit of its employees. That's the first thing. It's, the employer adopts it. Now, if you're self employed, we got some awesome strategies. Stay tuned.

I like that first basic point and let's stick with Dunder Mifflin today. We're going to do our best. You know, for any of you office fans out there. We might, you know, disappoint, but we're going to do our best for even the, just the moderate office viewer. I think everybody's seen an episode of the Office, so they know Dunder Mifflin. Great little intro jingle. Okay, I would add this basic point. Remember, at any income level, you can always have an ira. So that's a myth we've been dispelling for years now. That's not the topic today. But what it relates to is you can have an IRA and a 401k which a lot of people have thought, well, I have a 401k at work, I can't do an IRA. No, you can, you can do both. That's a very important basic principle too because as we blow your mind today, we want to maximize the 401k by at the same time maximizing your Roth IRA or individual IRA. They really work hand in hand when you, you get efficient. So having a 401k at work, great thing. You can have both. That's another basic.

Yeah.

Do you have another basic point? I have one other one, but.

Okay, the other basic point is when you put money into a 401k and this is, you know, you've had a 401k somewhere else before. Most people are familiar with this. You can put money in as an employee and then the company typically does a match. So there's two different calculations. And way money goes into a 401k, it's the employee putting in some of their pay themselves and then it's the company usually throwing a match in. That's, that's the company's dollars that you wouldn't get if you didn't throw in a little bit of money yourself to kind of get that match. So it's kind of an incentive for the company to say, hey, we want you to participate and save for retirement. And, and if you do, we're going to throw A little money in. Now for those of you that are self employed, you can get super creative on that. And since you're such a great employee, why not just, you know, do a huge match on the company side and we'll get to that.

Yeah, we're going to come to that. Because you can have your own company with your own 401k and you can have your day job, 401k. You can have multiple 401ks. Right. Another basic principle. And then I'm going to lay out the first strategy. Another basic principle is the 401k is the investments within that 401k options. Investment options are typically dictated by the company and the broker dealer. They chose to set up the 401k. So if you work at Dunder Mifflin, they're going to have their little HR meeting in the, in the office and, and within the office.

Toby's going to run it.

Yep. Toby had run it and he'd say, he's going to say, here's your options. You got these five mutual funds to choose from or whatever the freak. And they're usually pretty pathetic, but that's okay. I'm going to disclose my first strategy here. But the 401k plan adopted by a larger company of which you're just a W2 minion, you're not going to have any choice to self direct it. Your investment options will be limited. Now you can have that second 401k in your individual small business which we're going to come to in a moment. But number one, for any of you that have a day job, 401k, it's not the end all game. So here's strategy number one, matching out. I call it the matching out. They're going to match you up to say three grand worth of your contributions. They usually say your first 3% of contributions based on your salary. That's kind of the given average. So if you make $100,000 and you put in $3,000 in your 401, they're gonna match that. The company will match.

They're gonna put in 3,000 themselves. So you'll have six now.

Yep. That's 100% return, people, no matter what. That's a good thing.

Yeah. Even if it isn't a crappy mutual fund that has, you know, 4% return year after year. That's free money. You just got that. That's 3,000 every year in that example that the company's thrown in. So.

Yep.

So I like that match. And then you're like get the heck out.

That's it. That's strategy one.

Okay.

Now, the reason why some of you are like, well, hold it. I want to maximize my 401k. Oh, we want you to maximize a 401k contribution. It may just not be at the 401k at work. Do the match and get the hell out. And then we got other options now.

Yeah, now everybody's in a different spot. So you might be like, well, that's all I got going. I mean, I'm. I'm. I got a good job. I got the income. I may want to max out. I may not want to match and go out. I may want to max out.

Yeah.

Okay. As. As the W2, because I don't have a small business. I have no other options that we're going to go through to do some other creative things. And so. And, you know, I could put in 19,500 per year into a 401k. That can be traditional or Roth. And this is your day job, 401k. This is solo K2 as an employee. So. And if you're over 50, by the way, you get to put in an extra 6,500. So you can put in 26 grand. So if you're looking to save, get some tax deductions on traditional or grow Roth tax coming out tax free, you could max out and stay in the company plan for now.

Yep. All right, now let's move quickly because many, many of you that listen to our show are small business owners. So you're like, what the freak? Let's get off the company plan. But if you're married or have a partner, they may be doing the company plan. So you want to know these rules. You want to kind of know the strategy. You may give advice at a dinner party and be a hit this weekend. We want you to be a hit. So believe it or not, Matt and I, as dorky as we are, we're kind of like Moran. What was the name? Ghostbusters. He threw the party down the hall from Sigourney Weaver, Morales.

Oh, Rick Moranis.

Rick Moranis. Rick Moranis, yeah.

The accountant. He's an accountant.

That's Matt and I at a party. We're like, come on in. We're going to be talking about 401ks. Everybody's, you know, bellies up to us at a party because they're like, I might actually get something out of this damn party. So we're the Rick Moranis of your party. We'll come and, you know, all right, now Note. Strategy number two is if you have a small business and you're making some money, that's kind of the concept here. Step one is we always want you maxing out your Roth ira, your hsa. But if your small business is making money, you or your spouses. We're going to come to the couple thing in a moment, but let's just focus on the basic one. You're single, day job or not, you're going to match and get out. But if you have a small business, realtor, consultant, selling crap on ebay, Internet marketing, mlm, whatever you're doing, you can set up your own company. 401k. And that opens a whole new world. Just come and see.

Don't you dare close your eyes. You don't even know the words.

I know I have to say close your eyes.

No, that's the lyrics from Jasmine.

That's the magic carpet ride.

Oh no, that's Aladdin. Aladdin sings that part, but whatever.

Okay, Matt, so tell us what's cool about the Solo 401k which is our special this month. Once a year.

Yeah, yeah, we do a special once a year for you small business owners. Even you got the side hustle. You can do the solo K. Here's why it's cool. I mean I've got like four reasons it's cool. But let me just hit one. You can put 58,000 a year into it. So for a lot of you that are like, man, I'm really wanting to save for retirement. I'm self employed. A lot of our self employed clients are the worst at having in a retirement account because they've been the one that has to set it up. It's not just at the company where you work where you just fill out some paperwork and you're enrolled and they take it out of your paycheck automatically and it's easy peasy. So a lot of small business owners and those self employed I think are behind in many instances. And so we need to get more money in. How can we do that? The solo K is going to get you bang for your buck. 58 grand a year is how much you can get in. If you got your spouse involved in your business, they can do 58,000.

Oh yeah, let's go. That's another strategy.

Okay. You can get way more money in than you could in an IRA or your company.

401k bottom and, and here's it. To add to strategy number two of being a solopreneur is a 401k is like a Honeycomb. You can have Roth pieces of that honeycomb, and you can have traditional pieces of that honeycomb. You can convert pieces of it to Roth after your own company does the match. So you can go to your day job, put in your money, get a match, make your 100%, come over to your personal 401k plan, put in the remaining portion of your 19,500 or 26,000 if you're over age 50, get a match from your own freaking company, and you can convert it all to Roth or make it Roth. So remember, the 401k strategy goes hand in hand with the Roth strategy. And I think that really is kind of almost number three. Get the solo 401k set up and then sit back and go, how much of this do I want it to be Roth? And really, all of it could be. I mean. Yeah, I love it.

Yeah, good. We got. We got shows on just traditional versus Roth in general to kind of dive into that if you want that. That's a, that's a. Takes a while to.

Can I have a Roth IRA and a Roth 401k?

I guess you can.

At any income level.

Yeah, I mean, yeah, we'll see what happens to the backdoor Roth IRA with legislation. But yeah, any income level. And the 401K. Just so you know, on the Roth. The Roth 401K. So if you're doing the solo K and you're just doing the employee Roth contributions, there's no income restriction that. Whereas IRAs make you do this little backdoor shuffle for if you're high income. So. So on the Roth, you get to go on the front door on the Roth accounts for the Roth 401K.

Now, this is why the show is PG13 at times. So I don't, you know, where some of you are at today in your personal life, but all this talk of front door and back door, I. I know it's tough. Stay focused.

Okay. All right.

I'm just going to leave it at that. Some of your kids have no idea what you're talking about in the car. You know, they're in the back seat. But I'm just saying they were.

They were tuned into all this Roth conversation, IRA 401k match. They were like, they were loving that. Yeah. Very focused on what you're saying.

Yeah. So let me just say there's. There's front door options and back door options. There's always an option to find the sweet spot with your 401k. Okay. What were you thinking? I'm Sorry. What were you giggling about? I was. Okay. Yeah.

I mean, I know and you know.

Okay, now here's the next.

I gotta be careful. There's nothing I can say that would.

Yeah, no, no, there's no good follow up of that one. Okay, that just left that. Let that fly. Okay, now if we go to strategy four, if we're on our sequence here, you've done your single. You're single, you've done the 401k. You may have the matching out at work. You're doing your solo 401k as well as your individual Roth IRA. I'm thinking, I'm looking up if you're watching on YouTube now, I think we get to the partner strategy. So if you're married now, we can go to another level and add the spouse to the 401k. What are our restrictions there? Thoughts? Matt, what do you think?

So first, does your spouse work? So your spouse may have a job at an existing 401k that they're putting into. And let's say that's happening and this could even be you, too. It's just to think this through. Let's say that your spouse put in 10 grand at the 401k where they work. But you're like, wow, we want to throw more in. We got more we can save. We want to build these accounts. Maybe we're doing traditional. We're chasing tax deductions for year end. We're trying to save. All right, let's add your spouse onto payroll in the small business because they got to be an employee. A lot of times we don't like adding a spouse onto payroll in your small business unless they're really working in it. And we want to make 401k contributions. So, like a lot of clients, like, should I have my spouse on the payroll to get Social Security and all this? No, it's not worth it. Don't, don't, don't chase that. But to make 401k contributions. Yeah, yeah. So let's say your spouse had put in 10 at the company 401k. All right, come over here in the solo K. And you know, we can do another 9.5of employee contributions and another 38,500 in company match on the employer side. So there's a lot of options in adding a spouse over. Now if your spouse isn't working, you don't need to worry about that subtraction of what they've done at their day job. 401k, you just start at 19. 5. Of course.

Yeah. I again think there's a lot of variables here depending on what your goals are in obviously what you want to invest in. Do I want a self directed 401k? Usually a solo 401k has so much flexibility because you're the trustee and your company adopted it. The TPA or third party administration fees are so affordable to have your own company 401k this month. We do our special every November where if you want a 401k this year and want to make a contribution to it for a tax deduction this year or put money in for a Roth this year, you have to have the 401k set up before December 31st. Now you don't have to put the money in until next year. And I know that puts the hair up on many of you financial advisors. Necks and CPAs freak out going yes you do by January. That's in a 401k where you're the fiduciary for employees and there's a lot of big time rules. But when you're the only employee and the only one that's going to complain is you against yourself, no one cares because you're only screwing yourself over. The, the only problem would be the IRS if you lie on the forms or trick the IRS into some deduction you never made. So it's very easy to get the 401k set up this year, get it adopted and then you can contribute to it next year. Matt, what are the prices? Just so people can think. Now this is a self directed 401k where you're the trustee if you want.

Yeah, so what Right now the special is. So we generally charge 495 to have one of our paralegals, basically our docs only paralegal setup. And there's 50 bucks off for the month of November which puts it down to 445. And so that's a very affordable plan for a law firm. We have, our plan is pre approved with the irs. It's got all the self directed provisions in it. You can do the Roth account, you can do Roth conversions, you can do after tax contributions. I mean it's like, it's like the Cadillac. It's got everything, you know, power windows, locks, you know, I don't know what they tout on the Cadillac. Oh, you've got power windows. That's a nice feature. But you know what I mean? Know what I mean? Okay. It's got, it's, it's. We have all the stuff in there that you're going to want but now if you need a consult with an attorney, it's more and you got to bump up to the attorney consult. But we push this in November because we get bombarded with everyone in December who's like, I need it set up. I got 10 days left. And it's like, yeah, and it's Christmas and we want our employees to have some days off. And so we try to incentivize everybody. Let's get it going in November so we all have enough time to get it done. You're going to have to review and sign some stuff too. And the IRS notoriously closes between Christmas and New Year's and has their annual system maintenance in the last week of the year. So you can't get anything done when all these deadlines hit. So we like to stay ahead of it. But yeah, we're here for it if you need help on getting that set up.

Okay, now let's hit another 401k strategy that's very important to blow your mind. Let's say you're like, okay, guys, I've been doing it, or I've set up my solo 401k or I've been doing the matching out. I've got my spouse on payroll or not. I've been funding the 401k, guys, I'm loving the Roth idea. I'm getting on more and more on board on the fact I never want to pay tax again on my investments inside my 401k. Roth conversions inside your 401k have to also be completed, paperwork wise, by December 31st. So if you're thinking of doing a Roth conversion, there's no income limit. It's all good. You can do conversions all day long, but you are going to pay tax on some of that conversion. And what are some math? What's the math people need to worry about there when they start doing conversions or timing. Any suggestions on that conversion on.

On traditional to roth within the 401k?

Correct.

I mean, just the biggest issue is you're just going to have tax, you know, so, like how much you want to convert. Just know you're going to have tax. Now if you just put traditional contributions in, because sometimes we have that, clients will just throw in some traditional contributions because the company does the match and the match from the company are traditional dollars because the company takes an expense for it. But we're going to convert that to Roth, which means you pick it back up into income. So those two wash out because you took a deduction but then you had to pick it back in income to convert it. So just keep that in mind if. Now, if you have existing traditional dollars, because we see this too, people. Because, you know, let's say you set up a solo K and you have other retirement accounts, you can roll those funds into the solo K, a traditional IRA that's been sitting out there somewhere else, an old employer 401k, I can roll that in. If these are traditional dollars, I get into the solo K, I can convert them over to Roth, but I pay the tax on the amount I'm converting over.

Yeah, okay. And I love it. Now, blowing your mind, everyone. This is an add on to Matt's strategy that he just talked about is if you're a part of a larger company 401k plan or have a solo with no employees, there's a technique called an after tax contribution where you may put additional Money in your 401k and not take a write off for it. And those monies when you convert to roth inside your 401k, you don't have to pay tax on because you never got a deduction in the first place. So if you kind of do the 19,000. So an example would be, everybody think, okay, focus, focus. Let's say you're under age 50, you put in 19,500 in your solo 401k as Roth contribution. There's no tax, there's no conversion, and you didn't get a write off. But it has to go on your W2, on your little S Corp. And you're going to be doing your little 401k documents at the end of the year on your payroll. But you put it in 19, five. Now if the company matches, let's say five grand, when you convert that five grand to Roth, you'd pay tax on that. Well, on top of that, you could do an after tax contribution to the traditional portion of the 401k. It's a very unique strategy. You want to understand it, Get a consultation with the lawyers or your accountant before you do it. It's in your solo 401k binder. But you could make that contribution and then turn around and convert it to Roth. And there's no tax that allows us to start opening the door to what we call the mega backdoor Roth. Because now you're combining Roth IRA money, 19, 5, Roth money and match or after tax contribution money to get into 60 or $70,000 worth of Roth money. Very, very complex. But Matt, what did you add to that?

Yeah, so the only thing I would add is that takes Some gymnastics. So when, when Mark says talk to your attorney account, you're going to have to de engage your accountant. This is all going to happen on your tax return. Because what happens is when you do that after tax contribution, let's say you're an S corp, that's got to be on your W2, that's got to get recorded on your W2 as an employee after tax contribution. And then when you convert it, there's got to be a 1099. Now we know there's no tax on it, but this all stuff has to happen in order for this to work. So now I got a 1099 R and if you're doing it directed, we have a form for this that we have a custodial account here where we're holding your money. We're going to pick this up and throw it in your solo K account here as an after tax contribution which you're immediately electing to convert to Roth. So now it's just regular Roth 401k dollars just like the rest of your Roth 401k that you have. But we're going to send you a 1099. Now I've had clients like, why do you send me a 1099? Because I have to. You have to pick it up on your 1040 and say that the taxable amount from the 1099R is zero because it was an after tax contribution I didn't take a deduction on. And they're going to look and make sure it was on your W2. And so this stuff all has to loop. So just know there's some mechanics to it. And a lot of solo K clients are kind of do it yourselfers and they do their own taxes. And we're not doing this piece for you. This is a little sophisticated. If you're going this route, you haven't used an accountant before. It's probably time you start having an accountant do your tax return. So make sure this is getting done right. I love it.

And the moral of the story here that I like to joke about is if you're going to launder money, you got to follow through with it. You got to go through the steps. You can't just say you did it or check a box and think it's all going to get done. And I joke about that, but it's really true. The irs, if you just do a part of this, they don't know what's going on. They're out in the cold. You know, you took them on a date, you wind and dined them and then you disappeared. They're like, where's the closure here? Are we going to stay in touch what really happened? Did you ghost me for a reason? Do I need to go key your car? I mean, there's a lot of parallels in life here. You do not want to leave the IRS wondering what the hell happened because they're not going to stay silent. They want closure.

Yeah, they could be. They could be the. The worst ex girlfriend ever. I mean, they can lean your property. They can subpoena you. I mean, an ex husband, they could

be a stalker ex husband. They just don't leave you alone. They, you know, come over and break your windshield.

I mean, don't take you to court.

Yeah, it's genderless. It's. It's faceless. It's scary. So anyway, follow the. Close the loop out.

All right, now, high end strategy, but it's not that complicated. That's how you say it's cool. It's a high end strategy because I have lots of clients that call in for it. I'm like, okay, you ready to contribute? No, I actually don't have that much money to contribute. Okay, yeah, yeah. Get the 195 in. You can do that, Roth, easy. Let's get that 19 5. Then let's talk about Maxim.

Yeah. Now let's go back to Dunder Mifflin here for a minute because I think there's an important question some of you might be having as you're listening.

Yeah, I want to go back to Dwight Schrute and Schrute Farms.

Okay. Oh, yeah, yeah, yeah. Okay. Well, I'll say this, then you can go to Schrute Farms.

Okay?

So my point is to remind all of you that at Dunder Mifflin's 401k plan, you're going to have a limited buffet of choices on what you can invest in. Remember, with these solo 401ks, I wouldn't

call it a buffet. I'd call it like high school cafeteria. You just get whatever's on the menu that day.

This is not Sunday brunch. Yeah.

It's not like we got the taco bar over here.

Yeah, this is 711 at 2:00am you know? Okay. You're like a crusty old chili dog. Maybe some nachos with some goopy nacho sauce. It's been there for 48 hours. Simmering. Okay? So not a lot of choices. 711 or Dunder Mifflin for your investments. But this is the beauty of the Solo 401k on the side, because this can be fully self directed and you can set up LLCs, you can buy real estate. You can buy crypto. We have crypto solo 401ks you can set up immediately. You can buy, do loans first, trust deeds, tax liens. So many different investments that you dream of doing in your retirement account at work, but you can't. But that's why we set up this 401k on the side. And some of you say, well, I don't have a big enough business to do that. Or do you? Schrute Farms. You see how I set that up for you? I teed that up. I walked out on the mound. I just set that little ball right up on the tee for you, Matt. And you can just swing your little heart out with that helmet three sizes too big for your body. Go ahead.

Okay, so just, just think of Dwight Schrute. Remember Dwight Schrute, okay? He, he's assistant to the regional manager of Dunder Mifflin.

Yeah.

You know, that's a big deal. He's pretty big bill over there. He's. He's throwing his money in the 401k, but he's like looking at his investment options. He's like, man, I got a bunch of crappy mutual funds here. I don't even know what they are and they feed me to death. And my account just isn't growing much. But Dwight knows, he listens to the Main street business podcast and he's like, I have a small business. I got Shrut farms. Right? He does like events there. And, and I forget his little. His like, I think it's like his cousin or someone that, that works on the farm with them. But anyways, so he's got his own business. Okay. Solopreneur. Okay. Just Dwight here, he can go set up his own solo 401k. Even though he got, he has the day job 401k at Dunder Mifflin, he can set up his own solo 401k. He can contribute to it. So again, let's go back to the, the 19, five here. Let's say you put in 10 grand in the Dunder Mifflin for 1K. Okay. Well, he can do 9500 now of employee contributions in the Shrut farms. Dwight's under 50. And then he can throw in another 38, 500 to get up to the 58,000 total. That from Shruit Farms. So now he has to have the income from that from Shrut Farms. If he was making 10,000 bucks in Shruit Farms, he Could only throw in the 9500, but if he's making some good money, he could possibly throw in and really max out this 401k, which the solo 401k could be self directed. Now Dwight can go out and buy some real estate. Dwight can go out and buy crypto. You know that Dwight's more into real estate and crypto than mutual funds because, I mean, so those investment options now are on the table in this solo K that he's got.

Right. Well, I have one last strategy. I wanted to kind of finish with the mega backdoor Roth, because that's freaking awesome. And I can combine my 401k at work, my 401k at Shruit Farms, my personal Roth IRA, and I can get my spouse on if I'm married in the 401k, I can help my kids set up their own Roth IRAs. Freak. You can put away $100,000 or more of Roth money in your little family circle potentially and start investing in some amazing things. So when people come to our summit and they see that, it blows their mind. And so super cool. But at the summit, which I think we're almost available for those tickets, I mean, people can buy access to the recordings of the summit. You'll get an email. If you're on our newsletter, please make sure you're on our newsletter list. In a breakout session, I brought up what is now coined the side door 401k. You ready for the side door?

Yeah, Yeah.

I know we covered front door and back door, but

side door. Okay.

Some of you are already thinking of all the options here. I know. Okay. This is such an exciting show. Covers so much ground. Okay. With the side door 401k, what we have as clients. You're just a dirty birdie today, Matt. I don't know what you're thinking about on YouTube. I'm just grinning over that. What are you.

I'm innocent. I am innocent of a.

It's totally inappropriate. I don't know what.

You're not guilty.

Okay, all right, all right. Let's say some of you are like, Mark, I don't have a Shrut farms. I don't have an operational business. I'm not selling crap on the side or I'm not a consultant or a coach or a team. This or selling on ebay or blah, blah, blah. I don't have a business, but I do have rental property. I guess I can't do it. Ooh, no, no, no, no. My dear friend, we have an option for you. It's called the side door. So for those of you that have rental property that have also dreamed about maxing out, maxing out Roth 401k money is we. Which you'd never do. You would never do this. And there's crazy companies out there that recommend Wyoming C Corp and bull crap like that. Be careful. But.

Well, let me, let me interject too that the rental doesn't qualify as a business to make solo K contributions itself. So just know that, that like this is why the front door was kind of shut to you. For the rental property owners, they're like the IRS is like, nah, rental property businesses. That's rental income. It's not like employee wages or self employment income. So we're not going to let you put that in a 401k. So the front door got thrown at you, but Mark Kohler has found a side door.

Yeah, and I'm glad Matt clarified that because I was making an assumption. All of you know, well, I have rentals, I can set up a 401k. No you can't. It's passive income. You don't have a day job or a side job. You're passively managing your rentals. So, so what we do is we would, which I say we would never normally do is we would set up an LLC to manage your rental property, which I think is far, far, far overkill for asset protection purposes I've written about in my books. But we're not doing this for asset protection. In any asset protection benefit would be minimal in my opinion. But if you set up an LLC to manage your own rental property and pay a management fee to that new llc, you just create an ordinary income which again you'd never want to do because you just created self employment income.

I want to do the opposite. Typically, right.

I want to take passive income.

Yeah.

All day long, give me passive income. But by creating this management LLC that has its own ein and adopts its own solo 401k, you transfer over a management fee just enough to contribute the perfect amount you want in your 401k, whatever that amount is. So you zero out the management company income by deducting your 401k contribution. Unless you want to go Roth, then you would pay some tax on that. But the beauty is you're now converting passive income into 401k qualifying income and funding a 401k through the side door. Sorry, let me grab a pen.

I just want to make sure you don't drop mics here. They're too expensive.

This is a pilot G210. I mean, that's. Yeah, I'm not dropping Mont Blanc over here, people. I mean, this.

There we go. Okay. Yeah, yeah.

Cory's like, do you not drop that mic, damn you.

Yeah. Let's look. We're not the rock stars smashing guitars either. Yeah, I love that, that side door analogy because it. It really is kind of. It takes a little shuffle. We're not getting in the front door. We're not going around the back either. It really is just kind of a little sidestep to get over to the solo K. And a lot of you are rental property owners. And I think this is a great way. And you may be like. Because I run into clients like this that are like, I'm not really looking to contribute that much in the solo K, but I want the solo K because of all the other benefits of it. You know, I want to. I got some other traditional IRA money to roll into it maybe. Or I've got an old employer 401k, I want to roll into it. I like the solo K because I can take a loan out for it to myself for up to half the balance, not to exceed 50 grand. Or I can buy real estate with debt and not have to pay UDFI tax, which is unique in a 401k that IRAs have to deal with. So these are the only perks that you have in a solo K. And so a lot of people are always trying to find a way to get to the solo K over an ira. And this could be one of the ways. Just a little see if the side door is open for you. Yep, you got the rental properties.

No, I know it's distracting. When Matt brings up the word shuffle, many of you are thinking of the truffle shuffle from the wonderful movie classic Goonies. So you're thinking of the truffle shuffle. But really, this is another method of taking control of your future. This is your 401k people. You're the captain of your ship. And some of you know, I know are blown away in the fact that your accountant or tax advisor, whatever, whoever they may be, your sister in law, you make spaghetti dinner for once a year and she knocks it out on TurboTax. That may not be your best tax advising relationship. So take control. This is yours. You can do it. There's all sorts of strategies out there you may not be aware of. It's so, so fun, so powerful, and so hopefully. I don't know. I don't have anything else, man. This is it. I mean, I just I. This is it.

Yeah. Well we have a lot of content on solo case strategies, specifically how it works, how you contribute, some qualification rules. What if I got employees, Matt, there's some tricks, things you got to know there. So just get into that other content. We've got webinars videos on, on directed ira.com if you go to the solo K page. Also if you get to the special page for KQS lawyers, we've got a lot of content there to just get educated on it. There's a chapter in my book, the self Directed IRA Handbook on the solo case chapters in Mark's book on this strategy as well. So it's a big one for those self employed because I love it because you really do get all the power of a 401k that the government did to incentivize savings. But you get a supercharge it because it's just you as the employee. So you make it as generous as the law would ever allow you to do. And if it's just you, why not?

Oh, oh. And I just remember one last strategy is once your solo 401k through the side door, the front door, the back door, wherever you go, once your solo 401k is set up, you can roll into it any old 401k money from a prior job, any old IRA money. You cannot roll in Roth money. Once it's a Roth ira, it's stuck as a Roth ira. But you can roll in traditional then convert to roth inside the 401 just again, so much flexibility and the sky's the limit. You can self direct it, invest it. So I don't. Anyway, I just want to tell all of you thank you for letting us be a part of your lives and talk about such an important principle because the more financial freedom you have, I just think it just makes life a little more richer. And I'm not talking about the financial richness of life, just a little bit of more flexibility, a little more, a little less stress in your life maybe. So please keep.

Well, I'll just say this. Yeah, I'll just say this too, if I can, you know, riff off of that for a moment here is that I like it because there's this sense of satisfaction in doing it, you know, and doing it for yourself and taking control. When we take a back seat on our money and our finances and particularly our retirement accounts, which for so many of Americans is their largest stash of money, is a lot of people just taking a passive view on it and they've just left it to a financial advisor or they literally set up a 401k at their work and they pushed a few buttons 10 years ago. I don't even know what the frick it's set in to default invest into. But when you take control of it, there's so much satisfaction and enjoyment. It gives you better peace of mind. It's actually fun. You're in control of your future and then you get rewarded for that, of course, down the line when you get to retirement. So yeah.

Okay. Well, thanks everybody for listening. We'll be here next week and you can catch us on YouTube or on your favorite podcast platform. Please, if you feel so inclined, give us a like, give us a five star, a share, whatever you can to help spread the good word. And thank you so much for listening, watching, and we'll see you next week. Sam.