Funding a Solo 401(k) and withdrawal in same year (over 59 1/2)
Assume I fund a Solo 401(k) account early in the calendar year with a lump sum from a significant business transaction (1099).
If for some reason I need cash towards the end of that same year can I withdraw funds without a penalty? I’m 60.
I assume the trustee would treat it as a distribution which would amount to the same tax treatment as if I never deposited it. Thoughts?
Permalink Submitted by Alan - IRA critic on Sat, 2020-05-09 22:30
If the plan document allows in service distributions at 59.5, you could take the distribution. There would be no penalty.
Permalink Submitted by William Tuttle on Sun, 2020-05-10 03:18
If you are eligible for the QBI deduction. You should wait until you know if you will need the money later. If you make pre-tax contributions to an employer retirement plan. That will reduce your qualified business income and associated deduction even if later distributed. You would be far better off to never have made the contribution in the first place.