This is the first in a series of posts, giving responses to questions that I have been asked….and a little commentary.
One of my favorites:
“Could I set up a Solo 401k with Longboat, transfer the money I have in my current IRA to the new Solo 401k, write a check for the full amount, cash it out and flee the country?”
My answer “I wouldn’t be able to stop you, nor would I or anyone else know that you cashed out. It would be illegal. The bank may fill out a suspicious transaction form when you cash a large check. You would be taking a contribution, and it would be a taxable event. I don’t recommend this.”
I’m sure people have done this and gotten away with it, but I don’t recommend it. Any time you take money out of your traditional IRA or 401k it is a taxable event – the IRS wants their piece of the pie.
I am not sure what this guy wanted to do with the cash, but if he was thinking of investing it in another country, he could do that legally with a Solo 401k. It would be harder, but possible with a Self Directed IRA (you would have to ok it with your custodian).
I am not in the business of giving tax or investment advise. There is no shortage of “gurus” out there who will sell you snake oil and “fail safe” investments. caveat emptor