One of the more popular options of a solo 401(k) Plan is the loan feature. Unlike an IRA which does not offer a loan feature, with a solo 401(k) Plan, an individual has the opportunity to borrow money from his or her solo 401k plan without any penalty or tax.
The Solo 401k allows participants to borrow up to $50,000 or 50% of their account value (whichever is less) for any purpose at a low interest rate (the lowest interest rate is Prime which is 3.25% as of February 12, 2014). This offers a solo 401(k) Plan participant the ability to access up to $50,000 for use for any purpose, including paying personal debt or funding a business.
As long as the plan documents allow for it & the proper loan documents are prepared and executed, a participant loan can be made for any reason. The solo 401k loan is received tax-free and penalty free. There are no penalties or taxes due provided loan payments are paid on time. The IRA Financial Group solo 401(k) Plan documents will allow you to use a loan from your solo 401(k) for any investment purposes, including real estate, funding your business or a new business, tax liens, private placements, etc.
The ability to borrow tax-free and penalty from a solo 401(k) plan make the Solo 401(k) plan the most popular retirement plan for the self-employed. To learn about the advantages of adopting a solo 401(k) plan, please contact a retirement tax professional at 800-472-0646