401(k) Plan loan feature helping first-time home buyers secure necessary funds to purchase a home
IRA Financial Group, the leading provider of solo 401(k) plans for self-employed and small business owners, has seen a growing number of millennials who are first time home buyers using the 401(k) plan loan feature to purchase a home, according to an IRA Financial Group internal report. Internal Revenue Code Section 72(p) allows an individual 401K Plan participant to take a loan from his or her 401K Plan so as long as it is permitted pursuant to the business’s 401K Plan documents.
A solo 401k loan is permitted at any time using the accumulated balance of the solo 401k as collateral for the loan. A Solo 401(k) participant can borrow up to either $50,000 or 50% of their account value – whichever is less. This loan has to be repaid over an amortization schedule of five years or less with payment frequency no less than quarterly. However, if the loan proceed will be used to purchase a primary residence, the term of the loan could be extended to a longer term, generally fifteen or thirty years. The lowest interest rate that can be used is prime as per the Wall Street Journal, which as of May 30, 2017 is 4.00%. “In 2017, we have seen a growing number of millennials seeking to use the 401(k) loan option as a way to finance the purchase of a primary residence, which in many cases is their first home purchase,” stated Adam Bergman, a partner with the IRA Financial Group.
With IRA Financial Group’s Solo 401K plan loan feature, an entrepreneur who is self-employed individual or small business owner with no employees can borrow up to $50,000 tax-free and penalty-free. There are no penalties or taxes due provided loan payments are paid on time. “The Solo 401(k) loan feature has proved to be an attractive way to get tax-free and penalty-free use of up to $50,000 of retirement funds that can be used for any purpose, including the purchase or financing of a primary residence,” stated Mr. Bergman.
The IRA Financial Group was founded by a group of top law firm tax and ERISA lawyers who have worked at some of the largest law firms in the United States, such as White & Case LLP, Dewey & LeBoeuf LLP, and Thelen LLP.
IRA Financial Group is the market’s leading provider of self-directed IRA LLC and Solo 401(k) plans. IRA Financial Group has helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate without custodian consent.