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How does self-directed solo 401k work?
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3 Replies
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A self-directed Solo 401k works by allowing you to invest in a broad range of alternative assets beyond just publicly traded securities. Here are the key points about how it works:
Eligibility: A self-directed Solo 401k is designed for self-employed individuals with no full-time employees other than a spouse.
Contributions: You can make employee deferrals of up to $23,000 in 2024 ($30,500 if age 50+) as well as profit-sharing contributions of up to 25% of your net self-employment income, up to the overall limit of $69,000 ($76,500 if 50+) for 2024.
Investment Options: With a self-directed Solo 401k, you can invest in alternative assets like real estate, private companies, precious metals, promissory notes, tax liens, and more by simply writing a check from the plan’s checking account.
Checkbook Control: You open a checking account for the Solo 401k at any bank you choose. This allows you to make investments directly by writing checks or wiring funds from this account.
Custodian: While you have checkbook control, you still need a third-party custodian to hold the assets and perform reporting for the Solo 401k.
Funding: You can fund the Solo 401k with annual contributions or by rolling over funds from other qualified retirement plans like 401ks, IRAs, etc.
Loans: The plan allows you to take participant loans of up to $50,000 or 50% of the account value.
Roth Option: Contributions can be made as pre-tax, Roth (after-tax), or after-tax for later Roth conversion.So in essence, the self-directed Solo 401k provides generous contribution limits, broad investment flexibility including alternative assets, checkbook control for making investments, and the ability to take loans – all within the structure of a qualified retirement plan for the self-employed.
mysolo401k.net
Investments - My Solo 401k Financial
A Solo 401k Plan can be self-directed into Real Estate, Notes, Gold Coins, Silver, notes, tax liens, private equity and promissory notes.
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Please see 2025 self-directed 401k contribution limits including video webinar discussing the same HERE.
mysolo401k.net
solo 401k contribution limits and types
Two parts make up the annual Solo 401k contribution: employee salary deferral contribution and employer profit sharing contribution.
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