Solo 401k Facts for Self-Employed Individuals

Estimated reading time: 2 minutes(Last Updated On: September 18, 2023)

Solo 401k plans are known to offer high contribution limits and flexible investment options. These individual 401k retirement plan options will allow you to contribute to the plan as an employer or employee, and they are best for self-employed business owners with no full-time employees.

How to qualify for a Solo 401k?

The following two guidelines must be met before you can qualify for a Solo 401k plan:

1. You must be self-employed
2. You must not have any full-time employees working for you

If you and your spouse own a small business, for tax purposes, you are considered “owner-employees” and not “employees.” Solo 401k plans will allow you to use your retirement savings to make many different types of investments. Some of the most common types of investments you can make with a Solo 401k plan are:

• Residential and commercial real estate
• Mortgages
• Stocks
• Bonds
• Mutual Funds
• Commodities

Benefits of a Solo 401k plan

The Solo 401k is a very unique retirement plan because it was designed specifically for self-employed business owners. It is a very tax-efficient and cost-effective retirement plan that offers all of the benefits you would expect from a Self-Directed IRA plan. What also makes this retirement plan great is it includes high contribution limits and a loan option.

Another benefit this retirement plan offers is that you will not have to pay a custodian. These plans do not require a bank or trust company to act as a trustee, and they can be opened at almost any local bank or reputable financial institution. The Solo 401k plan $50,000 loan feature is great for individuals seeking immediate funds to finance their business. Other benefits to using this loan feature include:

• Paying for college expenses
• Paying for emergency or medical bills
• Investing in a new business
• Refinancing your business
• Paying for new real estate or products for your business

These are some of the many appealing features of a Solo 401k plan for self-employed business owners. Contact our experts at Quest Trust for more info on how you and your business can benefit from a Solo 401k retirement plan.

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