What is a Qualified Retirement Plan?

A qualified Retirment Plan must satisfy the IRS Code. The IRS administers what is and what is not a qualified plan. They will issue a determination letter and this allows plan sponsors advance assurances (permission) that the plan does satisfy the IRS Code in form and operation. Funds can be rolled over or transferred between qualified accounts. IRA’s, 401 k’s, 403 b’s are examples of qualified accounts. In the parlance of financial advisors, qualified has another meaning. To them qualified means “this money has not been taxed, the gains have not been taxed but they will all be taxed at some point in the future”. Qualifed plans have built in distributions. The IRS has let you contribute before tax contributions for years and also let the gains grow tax deferred. BUT they want their tax so they created RMD’s (Required Minimum Distributions). Once you attain the age of 70 ½ RMD’s kick in. The IRS will force you to take taxable distributions even if you don’t want or need the money.

Roth IRA’s and Roth 401 k’s are also qualified accounts but have different rules. Roth IRA’s do not attract the Requirment Minimum Distribution rules. This means no one will pay income tax as long as the Roth rules are adhered to. Roth 401 k’s will attract the RMD rule but there is a way to avoid that when the time comes.

At Self Directed Retirement Plans LLC we specialize in checkbook controlled self-directed 401 k’s for our self employed clients and checkbook controlled self directed IRA’s for our other clients.