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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.

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

Checkbook Control

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.

True Diversification

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!

Ecclesiastes 11:2

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

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.

Other Advantages

Roth Solo 401k 

Traditional IRA plan holders with high incomes are not allowed to contribute to a Roth IRA. Solo 401k Plans, however, can have a sub-Roth account and you can contribute without any income restrictions. The account allows you to make after-tax contributions of up to $23,000 (for 2024), a significantly larger amount than Roth IRA.

Cost-Effective Administration

Solo 401k plans are simple to set up and manage. You won’t need to file an annual tax return unless the plan has more than $250,000 in assets. In that case, you will need to file a form 5500-EZ with the IRS.

Rollover Ability

Solo 401k plans permit rollovers from other retirement plans like traditional IRAs, SEP IRAs, or even a previous employer’s 401k, 457 or 403B. You can simply roll over your retirement funds from an IRA or a qualified plan into your new Solo 401k Plan. There is only one exception: you cannot roll over funds from a Roth IRA account.

Solo 401k Loan Option

With an IRA, borrowing money from the account is absolutely out of the question. But with the Solo 401k, you can take out a loan of up to $50,000 or 50% of the account’s value — whichever is less — at a low interest rate (prime interest rate plus 1%). A Solo 401k plan participant will always have access to as much as $50,000 of their retirement fund for any reason, including to settle personal debts or fund their own business.

   Learn more:

UBTI Exemption

If an IRA account uses mortgage to leverage their real estate investment, the plan holder will be charged a tax of approximately 37% for Unrelated Debt Financed Income(UDFI) – a type of Unrelated Business Taxable Income (UBTI). With a Solo 401k plan, however, you can make leveraged investments without triggering the UBTI tax. This is a major advantage for real estate investors.

   Learn more:

What our clients are saying:

Tony S

I started a Solo 401K plan with Dmitriy’s Sense Financial in 2015. It has been a great experience since then and the Solo 401k plan has been a wonderful tool. 

Tony S. – Skillman, NJ

Ben D.

In my opinion, anyone that owns their own business should have a Solo 401K, and I would highly recommend Sense Financial – you will not be disappointed!

Ben D. – Spokane, WA

Sandra H

Dmitriy and his staff have been incredibly kind, helpful, and responsive while I have been going through the process of setting up my Solo 401k plan.

Sandra H. – Chicago, IL

Alternate investment options with your self-directed account:

Real Estate

Precious Metals

Private Business

Stocks & Bonds

Private Lending


Investments That Make Sense!

It’s Your Money. It’s Your Future. Invest Your Way.

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