Menu Close

IRA Financial Group Blog

AdBits Episode 27 – Are All Solo 401(k) Plans the Same?

AdBits Podcast
4 Minute Read

IRA Financial’s Adam Bergman Esq. explains why all Solo 401(k) plans, the best retirement solution for the self-employed, are not created equal.




Without a doubt, the Solo 401(k) is the best retirement plan option for the self-employed. It doesn’t matter if you have an owner-only business, a side-job or you are a gig worker, you can open up one. In fact, you can probably open one at your local bank or any number of online sites. However, are all Solo 401(k) plan the same? Well, Mr. Bergman wouldn’t be doing this podcast if they were!

Solo 401(k) Basics

A Solo 401(k) is essentially a regular 401(k) plan that is designed for the self-employed. All you need is any type of self-employed income. If you are a business owner, you cannot have any full-time employees, other than a spouse or a business partner. That’s it! If you do consulting work, if you run a small shop, if you drive for Uber, if you are an Amazon seller, you can save for retirement using the plan.

The great thing about the plan is that you can supersize your retirement savings because of the generous contribution limits. For 2021, you can contribute up to $58,000 plus an additional $6,500 if you are at least age 50. This is because you may contribute as both the employee and the employer. Contributions can generally be made in pre-tax funds (traditional), after-tax funds (Roth), and, in some cases, nondeductible, after-tax funds into a traditional plan. Those can then be converted to a Roth.

Because you are self-employed, you get to choose the plan that fits your retirement goals. Therefore, you can shop around for the best plan administrator, who offers all the features you want. Plus, you are not limited in what you are allowed to invest in. Workplace 401(k) plans only give you a small menu of options. However, since you are in control, you can invest in alternative assets, such as real estate, precious metals and Bitcoin.

Why Aren’t All Solo 401(k) Plan the Same?

As Mr. Bergman alludes to in the podcast, you can look at religion as a way to compare different plans. Whether you are Christian, Muslim, Hebrew, etc., there are certain things you must follow. Most have a shared, general acceptance of what you should and should not do. However, each faith has their own unique set of customs. This can be anything to how and when you pray, religious holidays, food you can and cannot eat, etc.

While, you can open a Solo 401(k) at just about any financial institution, they are not equal. They are all governed by the IRS, which explicitly states what you can and cannot do with your 401(k). However, they will differ in what they actually offer in the plan. There’s a myriad of options the document sponsors can offer, but not all institutions offer them all.

At IRA Financial, we allow for any combination of options you could ever want. You spend a little money to set the plan up exactly the way you want. Here are a few things to consider:

Roth Option: Does the plan allow you to make Roth contributions? This allows one to contribute after-tax funds, that will grow tax-free. You never pay taxes on qualified Roth withdrawal.

Loan Option: Will the plan allow you to borrow money? If permitted, you can borrow up to $50,000, or 50% of your account value, whichever is left. The loan can be taken for any reason and must be paid back at least quarterly with a low interest rate.

Alternatives?: The big one is the menu of available investments. If you open up a Solo 401(k) at a local bank, you will probably be limited in the investments you can make. However, with the right administrator, you can invest in just about anything you want. IRA Financial does not offer investment advice and they don’t care what you invest in. They are simply there to set up the plan and make sure you are in IRS compliance. You can invest in real estate, cryptocurrency, hard money loans, farmland, a private business. The list goes on and on.

Checkbook Control: How much control do you want over your retirement funds? Checkbook Control gives you complete control. If there is an investment you wish to make, you don’t need permission. Many plan administrators require custodial consent for every investment you wish to make. For some, that may be good enough. For others, you might not want to sit around for your investment to be approved.

You Deserve the Best

We’re not saying a Solo 401(k) opened at a local bank is bad. In fact, if you just want the basics, it may be enough for you. So long as you are proactive in saving for retirement, we are all for it. But, to those that want more, why not look into other options? For about $1,000, you can open up an IRA Financial Solo 401(k). You can utilize any options of the plan you want.

Best of all, IRA Financial will never push a financial product or service on to you. You are control of your retirement decisions. It’s up to you to make informed decisions based on your retirement goals and risk tolerance. We will never say no to an investment you wish to make, so long it’s permissible under the IRS rules. So go out there, and do your research and find out why IRA Financial may be the best Solo 401(k) provider for you.

Stay In Touch

We always appreciate our listeners and we hope you will continue to listen and spread the word. You can find AdBits on SoundCloud, YouTube or your favorite streaming platform. Thanks for listening and if you have any topics you want to see covered, give us a call @ 800.472.0646 today!

Related Articles