Gone are the days of the traditional 401K plans; today there is a better way to invest with your own 401K plan that is tax-free. That’s right, you can use your self-directed IRA funds to invest in nearly anything you wish, and it’s not only tax-free but also IRS-approved.
What am I talking about you ask? Well it’s called Solo 401K plan or self-directed IRA LLC. Solo 401K plans are designed around the small businesses without employees (in this case, your spouse does not count as an employee), and those that work as independent contractors, where the business they own and operate can be recognized as a LLC, partnership, sole proprietorship or corporation. The great news about a Solo 401K plan is that you get the same benefits and return as a “Self Directed IRA LLC” without the gate keeper “custodian” and fees.
Did you know that the Solo 401K limits for investing are better than an IRA, which only permits $5,000 contribution plus an additional $1,000 contribution “catch up” for those that are 50 years young and up, while an IRA that is self-directed allows you to contribute $49,000 plus another $5,000 catch-up contribution for folks 50 years young and up?
And did you know that unlike an IRA, solo 401k rules allows you “to borrow up to $50,000 or 50%” of the overall value of your account? That means with your solo 401K plan, you can barrow $50,000 to do with as you wish no matter if you want to pay off some debt or invest in some stocks, and it’s all tax-free.
Wait! There’s more. With your solo 401K or self-directed IRA LLC, the amount you contribute is unrestricted, so you can contribute as much as you wish (within legal means) or as little as you wish, and if you aren’t quiet 50 yet that amount can be as high as $49,000. How awesome is that?
One more thing: Solo 401K rules also allow you buy real estate while being tax exempt from Unrelated Business Taxable Income (“UBTI”), and you won’t get that with a traditional IRA.
Okay here’s the bonus! I will tell you where you can get your own solo 401K plan, and its supper easy: just go to your local credit union or bank and let them know you want one. That’s it.