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Solo 401(k)

The best plan for the self-employed

Maximize tax deductions and invest in alternative assets tax free.

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IRA Financial App

What is a Solo 401(k)?

A Solo 401(k) is a retirement plan specifically designed for self-employed individuals. Also known as a one participant 401(k), it works the same as an employer-sponsored plan, but with greater flexibility. To be eligible, you need to satisfy two requirements: the presence of self-employment activity and the lack of full-time employees. You can make contributions as both an employee and employer.

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IRA Financial offers an open-architecture Solo 401(k), giving your the opportunity to take advantage of all plan options.  These include a Roth sub-account, a loan feature, and the ability to invest in alternative investments, such as real estate, precious metals, and private lending. It’s arguably, the best plan for self-employed and owner-only businesses with easy administration.

Solo 401(k) Benefits

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The Solo 401(k)

As trustee of the Solo 401(k), you will have the authority to make investment decisions without the consent of a custodian. Read More

  • Maximize Contributions

    Make annual contributions up to $61,000 or $67,500 if age 50 or older in Roth, pretax, or after-tax.

  • Borrow up to $50,000

    Borrow up to $50,000 or 50% of your account value (whichever is less) and use your Solo 401(k) loan for any purpose.

  • Get Checkbook Control

    Serve as trustee of your plan and make alternative asset investments on your own with checkbook control.

  • Hassle-Free Administration

    Easy to operate and administer. There’s generally no annual filing requirement unless your account exceeds $250,000 in assets.

  • Real Estate Investor Bonus

    Leverage your 401(k) plan to invest in real estate and pay no UBTI tax.

  • No Transaction Fees

    Invest for one low flat fee, with no transaction fees, asset valuation fees, or minimum balance requirement.

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Open a Solo 401(k)

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Complete your Application

Once completed, it will go into a queue to be reviewed (generally, 3-5 days).

Application is Reviewed

Your application is reviewed to ensure everything is filled out correctly.

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Account Number Assigned

Once your application is approved, an account number is assigned and emailed to you (an additional 3-5 days).

Fund Your Account

You can now fund your Solo 401(k) via transfer, rollover, or direct contribution.

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Start Investing

Once your 401(k) is funded, you can begin making investments!

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Complete your application

Once completed, it will go into a queue to be reviewed (generally, 3-5 days).

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Application is reviewed

Your application is reviewed to ensure everything is filled out correctly.

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Account Number Assigned

Once your application is approved, an account number is assigned and emailed to you (an additional 3-5 days).

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Fund Your Account

You can now fund your Solo 401(k) via transfer, rollover, or direct contribution.

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Start Investing

Once your 401(k) is funded, you can begin making investments!

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Our fees

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Solo 401(k) Info Kit

Download our info kit to learn more about the Solo 401(k)

Robust, easy to read, and updated for 2022. This guide is your one-step for all the most important questions about the Solo 401(k).

Endless Investment Opportunities.

Real Estate

Whether it’s residential or commercial, rental properties or raw land, real estate is the #1 alternative investment among retirement investors.

Precious Metals

Metals and coins have long been used as a hedge against a volitile economy – just make sure they are IRS-approved and not held personally.

Cryptocurrency

Cryptos, such as Bitcoin and Ethereum, offer one the ability to invest in an emerging asset class.

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Tax Liens/Deeds

Tax liens and deeds allow for exposure to the real estate market in your portfolio without having to invest in the properties themselves.

Investment Funds

Hedge funds and private equity fund investments are generally for more sophisticated, accredited investors.

Private Placements

Investment opportunities offered to a select group of high net worth or institutional investors that have reduced risk and assured returns.

Quick FAQ & Further Reading

To be eligible for a Solo 401(k) plan, you must meet two requirements. First, you must have self-employment activity with the intention of generating a profit. Secondly, you cannot have any full-time employees, other than a spouse or another owner. If you meet these criteria, you can open a Solo 401(k) plan.

For 2022, you can contribute up to $61,000 to a Solo 401(k), plus an additional $6,500 “catch-up” contribution if you are at least age 50.  Contributions can be made as both the employer (profit sharing) and the employee (elective deferral). The employee deferral contribution can be made in pretax, after-tax or Roth, while the profit sharing contribution can only be made with pretax funds.

If your spouse is involved in the business and earns compensation from it, he or she can contribute to the Solo 401(k) plan. Your spouse can make separate and equal contributions essentially doubling the annual amount you can contribute.

Yes! Even if you have a workplace retirement plan, as long as you meet the eligibility requirements, you can also contribute to a Solo 401(k) plan. Keep in mind, the annual 401(k) limits apply to all plans in the aggregate. Further, you may also contribute to an IRA (traditional or Roth) up to the annual limit.

The IRS only describes what types of investments you cannot make with a Solo 401(k). These include collectibles, such as art, and any transaction that involves a disqualified person. Note: Unlike an IRA, you can invest 401(k) funds in life insurance (on a limited basis).

A 401(k) cannot engage in a transaction with a disqualified person; these include you (the 401(k) Owner), your spouse, any lineal descendants or ascendants (parents, grandparents, children, grandchildren), their spouses, and any entity where a disqualified person owns more than 50%

A required minimum distribution (RMD) is the amount you must withdraw from your Solo 401(k) once you reach age 72. The amount is generally about 3% of the total account balance. Unlike a Roth IRA, Roth 401(k) plans are subject to the RMD regime.

Unlike an IRA, you can borrow money from your 401(k) plan. You may take a long of up to $50,000 or 50% of your account balance – whichever is less. The loan must be paid back with a frequency of no less than quarterly. If you fail to pay back the loan, it will be treated as a taxable distribution, and penalties may apply if you are under age 59 1/2.

Because a Solo 401(k) is a tax-advantaged retirement account, there is no tax return due. However, if you have more than $250,000 in the plan, a short, informational return, called Form 5500-EZ, must be filed annually.

The major benefit of using a Solo 401(k) to make a real estate investment is that it is exempt from the UBTI tax. Therefore, you can use leverage (borrowing money) to purchase real estate, and not be subject to tax. The UBTI tax does apply to IRA real estate investments that use non-recourse financing.

Unlike a traditional 401(k), a Roth 401(k) is funded with after-tax dollars. There is no upfront tax break, however, all qualified distributions are tax free!

If you are looking to “supersize” your Roth holdings, you can contribute after-tax money, on a dollar-for-dollar basis to your Solo 401(k) up to the annual limit. You can then immediately roll over those funds to a traditional IRA and then convert it all to a Roth IRA.