Solo 401k Advantages

The advantages of the Solo 401k appeal to many self-employed contractors 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.

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

Checkbook Control

As the trustee of a Solo 401k account, you will have “checkbook control” of the assets. 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 your trustee.

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

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 of up to $61,000 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.

Salary Deferral: $18,500

Contribute up to $18,500 as an employee salary deferral. This can be either a pre-tax or an after-tax amount in a Roth Solo 401k account.

Profit Sharing:

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

Total Limit:

The combination of salary deferral and profit sharing contributions can total up to $55,000.


Those who are at least 50 years old are allowed a $6,000 catch-up contribution, bringing the total limit to $61,000 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 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.

True Diversification

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

  • Traditional stock and bond options
  • Real estate (rental homes & commercial buildings)
  • 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.

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

Traditional IRA plan holders with high incomes 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 restrictions. The account allows you to make after-tax contributions of up to $18,000, a significantly larger amount than with a standard IRA.

Solo 401k Advantages

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.

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