Question: How do I decide if I am qualified for a Solo 401k?
A 401k for individuals, or a Solo 401k, is designed for individuals who own a small business or have a self-employed activity without a full time employee. This self employed activity or business can be in addition to your full time employment elsewhere. So as long as you can prove a source of self-employed income and do not have any other full time employee working for you, you will be qualified to set up a Solo 401k plan.
Question: From what plan can I transfer fund into a Solo 401k?
A solo 401k accepts rollovers from other retirement plans like a traditional IRA, SEP IRA, or even a previous employer’s 401k, 457 or 403B. The only exception is Roth IRA, when rolling over to a Solo 401k is not permitted.
Question: I currently have an existing 401k with my employer, but I want to invest my retirement funds in real estate. Is it possible to transfer the funds into a 401k for individuals?
If your 401k is set up with your current employer, usually you are not able to transfer the funds until one of these two cases happens: a) you leave the employer or b) you reach retirement age.
In some rare cases, your employer might allow what is called “In-service distribution”. This means you are allowed to transfer the funds without leaving the employer, and before retirement age. To find out if your employer allows In-service distribution, talk to your plan administrator and ask if you can transfer your funds into another qualified plan.
Question: I have an outstanding loan against the account. Will it affect my ability to roll over to a 401k for individuals?
The outstanding loan is also an issue when you want to roll over the fund. Even if you are qualified for a Solo 401k, and you are allowed to transfer the fund, the loan is still not transferable. You will have to pay off the loan in full. Otherwise, it will be considered a distribution and you will be charged with taxes and penalties on the outstanding amount. It is recommended for people with outstanding loan against their 401k to discuss payment process with their plan administrator before transferring the fund.