Solo 401k Advantages

Solo 401k Advantages appeal to many self employed contractors and small business owners. 

With a Solo 401k plan, plan holders will enjoy many similar advantages to a Self-Direccted IRA LLC (or Checkbook IRA), but without the extra steps of having a custodian or forming an LLC. What draws investors to Solo 401k is that it is specifically designed for small business entities with only owner(s). Therefore, the plan offers cost-effective and tax-efficient investment solutions just like a Self-Directed IRA plan, plus some extra benefits.

In the end, what makes Solo 401k the ideal plan for self-employed business owners?

Understanding the key Benefits of a Self-directed Solo 401k Plan

Checkbook Control

As the trustee of the Solo 401k account, the plan participant will have “checkbook control” of the assets. You can now make investments as easily as signing a check. Also, you will not have to look for a trust company or any other institution to act as your trustee.

As the plan owner, you will have total control over your assets. There is no need to spend extra on custodial fees. Investment decisions can also be made without waiting for approval from a third party.

The lack of a third party custodian offers multiple benefits:

All assets will be completely in the hands of the account holders

No additional cost or delay to obtain custodian’s consent

High Contribution Limits

The Solo 401k offers a high contribution limit of up to $59,000 annually, almost 10 times as much as a traditional IRA. If a spouse of a plan participant is also generating income from the business, he or she can also make contributions.

Salary Deferral: $18,000

Contribute up to $18,000 as an employee salary deferral. This can be either in pre-tax or after-tax amount in a Roth Solo 401k account.

Profit Sharing:
20-25%

Make profit-sharing contribution of up to 25% of business earnings (or 20% for a sole proprietorship or single member LLC).

Total Limit:
$53,000

The combination of salary deferral and profit sharing contributions is up to $53,000.

Catch-Up:
$6,000

Those who are at least 50 years old are allowed a $6,000 catch-up contribution, bringing the total limit to $59,000 a year.

While the contribution limit allows you to save a large part of your yearly income, the decision to contribute to a Solo 401k is complete at your discretion. You can contribute up to the maximum limit, or as little as you want, even suspending contribution in case of financial needs. This means you are allowed to contribute a large amount to your retirement savings, but it is not at all a mandatory.

True Diversification

A Solo 401k account holder is able to invest in:

  • Traditional option of stock and bond
  • Real estate (rental homes & commercial buildings)
  • Tax deeds, tax liens
  • Private businesses
  • Precious metals
  • Hard money lending,
  • And More!

All income from your investments will be directed back into your Solo 401k Plan without tax. Making investment decision is also simple: you can just write a check to fund the transaction without asking for consent from a third party.

Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.

Ecclesiastes 11:2

Other Advantages

Roth Solo 401k Account

IRA plan holders of high income level are not allowed to contribute to a Roth IRA. Solo 401k Plans, however, can have a Roth Account and you can contribute without any income restriction. The account allows you to make after tax contribution of up to $18,000, a significantly larger amounts than with an IRA.

Renee A.

The returns I have made in 6 months in my Solo 401k beat what I made for the past 3 years in my company 401k plan! If you have the opportunity to switch to a Solo plan, take advantage of it NOW!

Renee A. – Westerville, OH

View more testimonials

Alternate investment options you get with a Self Directed Solo 401k:

 
Real Estate


Precious Metals


Private Business


Stock & Funds


Private Lending


Tax Deeds/Liens

Financial Concepts that Make Sense!

Greater Flexibility. Investment Freedom. Hassle-Free Management.

Our expert team is always ready to answer you! Give us a call at (949) 228-9394. You can email us at contact@sensefinancial.com