Starting a Business with Self Directed Individual 401 k Plan

self directed individual 401 k plan

self directed individual 401 k plan

Using your Self Directed Individual 401 k Plan to invest or start a business is easy. This amazing retirement plan allows you to invest your contribution to 401k account in any venture you can think of. Plus, with the availability of the 401 k plan loans, you and your family can finally start your dream business.

Investing with Self Directed Individual 401 k Plan

Unlike other retirement funds, the individual 401 k plan gives you the flexibility to choose any business opportunity you can invest in (except collectibles). With the self directed individual 401 k plan, you can invest your retirement account in precious metals, real estate, mutual funds and stocks, tax liens, tax deeds and even hard money lending. Best of all, the revenues earned from your investment goes straight back to your 401k account.

However, according to the Self Directed Individual 401 k Plan rules, all “disqualified persons” are not allowed to directly or indirectly benefit from these investments. A “disqualified person” is defined as the plan holder, his/her spouse and all ancestors and lineal descendants.

This means that you cannot invest your self directed individual 401 k plan account in something that you or your family is personally involved in.

Starting your Dream Business with Self Directed Individual 401 k Plan

Even though the Self Directed Individual 401 k Plan rule prevents you and your family from directly benefiting from the investments that you made with your retirement account, you can still finance your dream business using the loan feature of your individual 401 k account.

The Self Directed Individual 401 k Plan from Sense Financial lets you to take a loan of up to $50,000 from your retirement funds to finance your own business. This feature allows you to borrow 50% of the total value of your retirement account or $50,000 (whichever is lower), for any reason whatsoever. Furthermore, since your retirement account will serve as the loan collateral, no other credit qualification is needed to approve the loan.

The rate of interest for the 401k loan is constant. It is based on the rate of the prime at the time the self directed individual 401 k plan loan application was presented for approval. Also, all 401k loans are obtained penalty and tax free as specified in section 72(p) of the internal revenue code and the 2001 EGGTRA rule.

To find out more information on how you can start your own business using the self directed individual 401 k plan, please contact one of our Solo 401k experts.