Solo 401k Benefits
The advantages of the Solo 401k appeal to many self-employed individuals and small business owners.
With a Solo 401k, plan holders enjoy many similar advantages to those who invest in a self-directed IRA LLCs (or Checkbook IRAs) — but without the extra steps of having a custodian or forming an LLC. What draws investors to the Solo 401k option is that it is specifically designed for small business entities with only owner(s). In short, the Solo 401k offers a cost-effective and tax-efficient investment solution just like a Self-Directed IRA plan would, but with extra benefits.
Want to know more about what makes Solo 401k the ideal plan for self-employed business owners? Keep reading to find out.
As the trustee of a Solo 401k, you will have “checkbook control” of the plan and it’s accounts. You can make investments as easily as signing a check. Also, you won’t have to look for a trust company or any other institution to act as custodian. Unlike with an IRA, custodian is not required for 401k plans.
“Checkbook control” means investment decisions can be made without waiting for approval from a third party. And in addition all custodian, transaction and asset-based fees are eliminated which makes it extremely cost-effective.
Not needing a third party custodian offers multiple benefits:
- All assets are completely in the hands of the account holders.
- There is no additional cost or delay to obtain custodian’s consent.
High Contribution Limits
The Solo 401k offers a high contribution limit (over $70,000 annually), which is almost 10 times as much as a Traditional IRA. If a plan participant’s spouse generates income from the business as well, he or she can also make contributions.
While the contribution limit allows you to save a large part of your yearly income, the decision to contribute to a Solo 401k is completely at your discretion. You can contribute as much or as little as you want up to the maximum limit. You can even suspend contributions in case of financial need. Essentially, you are allowed to contribute a large amount to your retirement savings, but it is not at all mandatory.
A Solo 401k account holder is able to invest in:
- Real estate (residential rentals, commercial, etc.)
- Tax deeds and 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 being taxed. Making investment decisions is also simple: you can simply write a check to fund a transaction without asking for consent from a third party.
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Alternate investment options with your self-directed account:
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