Solo 401k Plan provides flexible investment opportunities for qualified holders. This enables the person’s retirement funds to be invested on different venture types. The investment could be made without the need for a custodian’s consent. There are very minimal types of investment ventures which are prohibited under the Solo 401k rules.
Investment Types Covered and Accepted for Solo 401k Plan
The following industries are acceptable where a person could make their investment using a Solo 401k Plan:
- Tax liens
- Private businesses and private placements
- Private loans and businesses such as Limited Liability Companies or LLC and Limited Liability Partnerships
- Residential, commercial and domestic or foreign real estate. This also includes raw land, foreclosure property and others that offer mortgages or mortgage pools
- Industries that include stocks, mutual funds and bonds, foreign currencies, certain coins and precious metals
It is important to note that only businesses that have no full-time employees are acceptable or eligible for the Solo 401k plan. The exception to the rule is that if the hired full-time employee is the owner’s spouse. Any other employees aged 21 years and up are not admissible or covered by the plan. Moreover, the eligible company or sole proprietor is expected to provide their solo 401k contributions for the plan.
The benefits of Solo 401k Loan Feature
Account holders are entitles to the to use Solo 401k loan feature and access up to $50,000 of account value, which can be used to fund their own business. The borrowed amount could also finance other needs such as:
- Pay for college costs and expenses, unexpected emergencies and consolidate debts.
- Lend the funds to any third-party in order to pay a much higher interest rate thus enjoying bigger profits and revenue.
- Invest on lucrative industries such as real estate projects which could potentially generate a much higher interest rate return compared to paying a low interest rate.
- Invest on a business or new franchise venture.
- Invest on alternative transactions or businesses that could guarantee higher return rates compared to low interest rates such as those imposed on private placements, tax liens and mortgage pools.
- Avoid penalties and gain that could amount up to $50,000 without any restrictions.
Solo 401k loan feature offers good alternatives qualified businesses owners. Sole proprietors who are eligible for the plan could absolutely use this opportunity to finance their business or use the funds for more lucrative business ventures and boost their revenues.