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Solo 401k for business owners

“Save your money. You’re going to need twice as much money in your old age as you think.” — Michael Caine

If you’re self-employed and trying to boost your retirement savings, Solo 401(k) plans are a potential option.

Solo 401(k) plans are qualified retirement plans for self-employed professionals and business owners with no employees other than a spouse. These plans have gained popularity because of investor-friendly features and higher contribution limits than traditional retirement accounts.

The biggest limitation on a Solo 401(k) plan is its eligibility criteria. You must have some sort of partial or full-time self-employment, and you can’t have any full-time employees — except your spouse — working in the business. Having such eligibility criteria rules it out for business owners with employees.

Solo 401k for Business Owners: What are the plan benefits?

For an owner-only business, it presents an option for ensuring your savings are sufficient to fund your retirement years.

Is a Solo 401(k) is right for you? Here are four reasons to consider Solo 401k for business owners.

1. High contribution limits

Unlike individual retirement accounts, which limit contributions to $5,500 (or $6,500 for those age 50 and older), you can contribute up to $54,000 to a Solo 401(k) account in 2017 ($60,000 for 50 and older).

Related article How to achieve financial independence with your small business

2. More investment options

Relying on the stock market for retirement, as many retirement plans do, may not sit well with investors who prefer to have more flexibility and freedom to choose different types of investments. With a specific kind of Solo 401(k) called a self-directed Solo 401(k), you can invest in alternative assets including real estate, tax deeds, tax liens, mortgage notes, private equity, personal lending, precious metals and even regular stock-bond investments. Make sure to ask your Solo 401(k) provider about the availability of these investment options upfront.

3. Roth, minus the income limits

According to the current IRS regulations, if you’re a single filer earning more than $132,000 in a calendar year, you’re not eligible for Roth IRA contributions. The phasing out starts at $117,000, limiting your options for after-tax contributions. A Roth Solo 401(k), which doesn’t have income limits, allows you to make annual after-tax contributions of up to $18,000, or $24,000 if you’re over 50, giving your money an opportunity to grow tax-free.

Related article:  How to choose a self-directed retirement plan for your future?

4. Ability to borrow

The IRS allows borrowing from a Solo 401(k) plan, just as it allows borrowing from 401(k) plans. This means no one can turn you down and you can spend the money the way you want. Just make sure you follow IRS rules about repayment to avoid taxes and penalties. And loans from a Solo 401(k) hold one advantage over loans from a regular 401(k). With a 401(k), if you leave your current employment, the loan will become due in full. That kind of job change is not a factor with a Solo 401(k) loan.

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Best IRA for Self EmployedRoth IRA is one of the well-known and oftentimes considered best IRA for self employed. If you are looking for reliable financial investment and retirement account, it is imperative to know more about this plan. Nowadays, you might find it more challenging to decide what retirement account to choose. There is a big difference as well as similarities for 401k vs IRA. Sense Financial Services LLC, the leading provider of premier retirement plan Solo 401k and Self-Directed IRA offers valuable information about these two topmost investment ventures. For Roth IRA, there are essential benefits from this account that you must learn and understand.

Roth IRA plan is not subject to Required Minimum Distribution Rules

One of the reasons why Roth IRA is considered the best IRA for self employed is that it is not required to comply with RMD rules unlike traditional retirement accounts. The Required Minimum Distribution rules subject the account holder to pay taxes on distributions. This is a requirement which takes effect as soon as the plan holder reaches 70 ½ years old. If you are not subject to RMD, tax-free income is accumulated, allowing the account to boost its accumulated and tax-free income throughout the duration of the owner’s lifetime.

401k or Best IRA for self employed: Which is best - distribution extension for surviving spouse

Roth IRA is not only the best IRA for self employed account holders but also a lucrative and useful investment for the surviving spouse. That’s because the account beneficiary of the retirement plan can still opt to continue the contribution to the plan. Or the beneficiary could opt to combine this Roth IRA to their own retirement plan, basically the same Roth IRA. This means that the surviving spouse could take over and benefit from the account particularly the growth on investment with its tax-free features. On the other hand, traditional retirement plans are not allowed to be combined and merged into the surviving spouse’s IRA. The beneficiary is also not allowed to opt for an additional contribution to the existing account.

Roth IRA account holders do not pay 10% early distribution withdrawal penalty

Account holders who decide to withdraw their account contribution before they reach the age of 59 ½ are not subject to the 10% payment of the early withdrawal penalty. Account holders could basically withdraw their converted or contributed amounts to their Roth IRA retirement account without the hassle of paying taxes or the penalty as long as they comply with the 5-year wait period making it the best IRA for self employed.

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Understanding Self-directed IRA

“The beauty of diversification is it's about as close as you can get to a free lunch in investing.” Barry Ritholtz

How do you feel about staking your entire future on the stock market? Risky, right! Who would do that? Surprisingly enough, a lot of investors are putting their money in the stock market directly or indirectly. If you rather invested in bonds to minimize the risk, you’re unlikely to gain the returns necessary to fund your retirement. That along with the changing federal interest rates makes bonds an unattractive investment option. So, how do you invest for retirement while minimizing your risk and still pocketing handsome returns? Investing in alternative assets with a self-directed IRA is an option to look into.

Why invest in alternative assets?

The alternative investment strategies have helped smart investors gain competitive returns over the years. Here are some reasons to add them to your portfolio:

  • True diversification & security: Investing in alternative assets allows you to achieve true diversification. You can minimize your risk profile by choosing different alternative asset classes. Real estate, precious metals, mortgage notes, tax liens, private equity, and real estate investment trusts (REITs).
  • Competitive returns: Unlike security bonds, you can earn better returns by investing in alternative assets. If you’re a realtor, imagine the sort of returns you can achieve by using your expertise and industry knowledge.

For an average investor, investing in alternative assets might pose some challenges, especially in choosing assets classes that can achieve your retirement goals. It’s best to seek professional help and make sound financial decisions.

What is a self-directed IRA?

Since you are investing for retirement, you’ll require a retirement tool that can invest in alternative assets with minimal custodial red tape around it.

Self-directed IRA comes into picture.

A self-directed IRA is a retirement solution that offers investment discretion/control to the plan owner. Depending upon your plan custodian, you can access most of the asset classes discussed above. Some of the popular self-directed retirement options include self-directed IRAs, Solo 401k plans, and 401k plans.

What are your investment options through a self-directed IRA?

  • Real estate: The IRS allows real estate investing within retirement accounts. The trick is that it is not mandatory for financial institutions to offer it as an asset class. However, with a self-directed IRA, you can invest in real estate starting with residential, commercial, and third-party real estate LLC investments
  • Private equity: If you have experience in business, you can use your retirement accounts to purchase private equity. While it is an exciting proposition, make sure to test the basics of the company and take professional advice.
  • Mortgage notes/tax liens: If you’re looking for passive growth/returns, mortgage notes, and tax liens are the perfect additions to your portfolio. You don’t have to fret about property maintenance and utility bills.
  • Precious metals: Gold and most of the precious metals are cyclical. They allow investors to hedge their investments against inflation, stock market movements and any financial fiasco.
  • Stock, bonds, mutual funds: Self-directed IRAs allow you to put your money in traditional investment options, including stocks, bonds, and mutual funds. With a self-directed IRA, you as the account owner can initiate transactions without going through custodians. This also minimizes transaction costs and fees. In order to retire with sufficient money, create a balanced portfolio and restructure it routinely.

Who should choose self-directed retirement accounts?

The financial goals of every individual vary and so does their investing strategies. If you have a limited understanding of the investment realm, you may want to use a professional’s help. A self-directed IRA is good for you if you are:

  • Ready to take control of your retirement account.
  • Tired of having brokers handle your money.
  • Wanting to diversify your investments
  • Tired of paying high custodian fees and transaction costs.

It is your retirement at stake, so take your time and make the right choice!

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Solo 401(k): A Good Retirement Savings Option for the Self-Employed

Among the available retirement options, Solo 401(k) plans are worth considering, due to their relatively high contribution limits, flexible investments and the ability to make after-tax Roth contributions.

Here are some reasons self-employed business owners should consider Solo 401(k) plans.

Higher limits

Because the self-employed professional wears the dual hat of the employer as well as the employee of the business, the contribution limits for a Solo 401(k) include both employee deferral (up to $18,000 annually, plus up to $6,000 in catch-up contributions for those over 50) and profit-sharing employer contributions (up to 25% of business income, depending upon the structure or type of business).

Combining these two, the Solo 401(k) limits for 2016 are $53,000, plus a $6,000 catch-up contribution for professionals 50 or older for a total of $59,000.

Under an alternative retirement savings plan for business owners, the Simplified Employee Pension (SEP) IRA, the contributions are limited to the lesser of 25% of the business income or $53,000 for 2016. The absence of elective salary deferrals or catch-up contributions restricts the overall contribution limits of a SEP-IRA when compared with a Solo 401(k) plan.

Here’s an example of how the Solo 401(k) leads to higher limits: Let’s say you had a business income of $100,000. With a Solo 401(k), you can make profit-sharing contributions of up to $25,000 along with employee-deferral contributions of $18,000, totaling $43,000. On the other hand, a SEP-IRA would allow you to make only a profit-sharing contribution of $25,000, hence limiting retirement savings.

Alternative investment options

A self-directed Solo 401(k) retirement plan offers alternative investments, including real estate, tax liens, tax deeds, mortgage notes, private equity, personal lending, precious metals, and the traditional stock or bond investments. These alternative investments help you diversify your portfolio while achieving competitive returns.

However, these investment vehicles and alternatives require an understanding of their core operating principles. Make sure to educate yourself before investing in them and, if necessary, get an expert opinion.

Tax-deferred growth

Like all 401(k) plans, with a Solo 401(k) plan your retirement savings enjoy tax-deferred growth. Thanks to compound interest and the steady rise of equities over time, this should be a solid investment. Compound interest is one of the key factors that decide the size of your retirement fund. In the purported words of Albert Einstein, “The strongest force in the universe is compound interest.”

Roth savings option

You can opt for the Roth feature in your self-directed Solo 401(k) retirement plan, which allows you to diversify your tax strategy with after-tax investments that will not be taxed when you withdraw your funds in retirement.

And unlike the regular Roth IRA, there are no income phaseout limits in a Roth Solo 401(k) plan. Under a Roth IRA, a single filer over 50 making less than $117,000 can contribute up to $6,500 in 2016 ($5,500 under 50), but as the salary grows, eligible contributions decrease proportionately. If you make $132,000 or more, you will be ineligible to contribute to a Roth IRA in 2016. A Roth Solo 401(k) has no such phaseout.

Last chance to set up a Solo 401k for 2016

If you want to benefit from the higher contribution limits of a Solo 401(k) plan in 2016, set up your retirement plan before Dec. 31, 2016. You can make actual contributions for 2016 until the regular tax-filing deadline, but an account has to be set up before the year’s end.

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“Compound interest is the 8th wonder of the world… Those who understand it earn it… Those who don’t pay it.” ~ Albert Einstein

Thanks to the efforts put in by financial gurus, a lot of people are aware of the concept of compound interest. For those of you a little dubious about the same, here’s a quick definition:

‘Compound interest is interest calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan. Compound interest can be thought of as “interest on interest,” and will make a deposit or loan grow at a faster rate than simple interest, which is interest calculated only on the principal amount.’ ~ Investopedia

Being a retirement solution provider, we help our clients realize the benefits of compound interest and one of the best ways to do so is to contribute towards a tax-deferred retirement account.

Why invest in a tax-deferred retirement account?

  • Compounding of your money: Your money enjoys tax-deferred growth for several decades, accumulating more interest with every passing compounding cycle.
  • Qualified deductions: By contributing to a tax-deferred retirement account, you are eligible for qualified tax deductions, hence reducing your tax bills right away.

Couple compound interest with a Roth Solo 401 k & Get Tax-free Distributions*

How about combining the magic of compound interest with a Roth Solo 401 k account?

Roth Solo 401k account is a retirement plan for self-employed professionals and owner-only businesses, allowing after-tax contributions. Under the plan, the account owner pays taxes upfront and in return, they receive tax-free distributions.

  • Annual contributions: $24,000 in 2016 (including catch-up contributions of $6,000 for professionals above 50 years)
  • No income restrictions: Unlike a Roth IRA, there are no income restrictions for making eligible contributions to a Roth Solo 401k plan.
  • Tax-free withdrawals: If your Roth Solo 401 k account satisfies certain conditions, you can receive tax-free eligible distributions in retirement.

Here is a short Infographic to highlight some of the primary features of a Roth Solo 401k plan:

Benefits of Roth Solo 401 k
Benefits of Roth Solo 401 k
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“It’s not how much money you make that makes you rich, it’s how you spend it.” —Charles Jaffe

With a little bit of research, you will find out that the same piece of wisdom has been coined time and again by several financial experts. While there are multiple factors that define as well as affect your financial wellness, we are going to target the most inescapable one – Taxation. When taken at its face value, taxation may appear as inevitable as possible or in the words of Benjamin Franklin, “In this world, nothing can be said to be certain, except death and taxes.”

However, there are some legitimate ways to lower your taxable income, and put that money to work for your future. If you are an owner-only business or highly paid self-employed professional, these strategies could uplift your financial health drastically.

Self-directed Solo 401 k

Solo 401k retirement plans have gathered a huge following over the past couple of years and rightly so. When used efficiently, it could help you increase your retirement savings by up to ten times of the regular IRA contributions.

Self-directed Solo 401 k: What is it?

It is a qualified retirement plan for owner-only businesses and self-employed professionals.

What do you need to know about it?

Contribution limits: Up to $59,000 in 2016 (including catch-up contributions of $6,000 for individuals above 50 years old).

Investment options: Real estate, tax liens, tax deeds, precious metals, private equity, personal financing, and stock/bond investments.

Participant loan: Flexibility to borrow up to 50% of the account balance to a maximum borrowing limit of $50,000.

Four Ways to Cut Your Taxable Income With a Self-Directed Solo 401 k

1. Ten Times Higher Annual Contributions

With an annual contribution limit of up to $59,000, a Solo 401k retirement plan surpasses regular IRA contributions several times. Further, it comprises of two different contribution types, including salary deferral and profit-sharing contributions, allowing you to achieve maximum contributions quickly.

Salary deferral contribution allows you to contribute up to $18,000 in 2016 along with a catch-up contribution of $6,000 for professionals above 50 years.

Profit-sharing contribution allows you to contribute 20 to 25% of your business income to the plan. The total salary deferral and profit sharing contributions are up to $59,000.

2. Deferred Taxation on Capital Gains

Much like its other counterparts, a self-directed Solo 401 k enjoys deferred taxation, allowing your investments to maximize compounding interests. Considering the vast majority of investment options available under self-directed Solo 401k plans, you can boost your wealth generating potential.

The key is to make sure that your Solo 401k provider offers alternative investments. When you invest with a retirement plan, always target long-term gains over short-term growth.

3. Power of Roth Contributions

High-income professionals are often deprived of Roth saving options in regular IRAs but not in a Solo 401k plan. For self-employed professionals, a Roth Solo 401k plan allows after-tax contributions regardless of the income levels. You can contribute up to $24,000 towards your Roth Solo 401k in 2016.

One of the key benefits of establishing a Roth Solo 401k is its ability to offer tax-free earnings. That’s right; all the compound interest generated by your investments goes directly into your account. There are no taxes on qualified withdrawals

4. Purchase Real Estate Under Solo 401k Plan and Forget Rental Income Taxation

If you are a big fan of real estate investing, a Solo 401k plan could introduce you to an entirely new level of profits/returns. Here’s what you need to do.

Purchase a rental property with a positive cash flow through your self-directed Solo 401 k. It’s entirely the same process apart from the fact that your retirement plan will hold the title of the property and all the expenses/profits will go directly from/to the plan.

By doing so, you’ve created an effective income stream, while saving taxes on the rental income. Make sure to:

  • Only use a non-recourse loan for the purchase if needed.
  • Pay maintenance cost from the plan only.
  • Direct rental income to the plan.

In conclusion, we can positively say that a self-directed Solo 401 k allows you to unlock multiple asset options along with a tax-deferred growth of your investments. It is one of the best ways to create a retirement plan that outlasts you.


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Solo 401k Contribution limits for 2017
"The difference between ordinary and extraordinary is that little extra." ~ Jimmy Johnson

If you're a player or sports fan, you understand the importance of 'extra' effort. When it comes to your financial lives, that little extra could help you grow your savings exponentially. The good news is that the IRS has announced new Solo 401k contribution limits for 2017, allowing you to save extra for retirement.

What are the new Solo 401k contribution limits?

In its latest retirement contribution limits' revision, the IRS has allowed small business owners and self-employed professionals save more for retirement.

New Solo 401k contribution limits for 2017: $54,000 ($60,000 with catch-up contributions for individuals above 50 years); up from $53,000 for 2016.

  • Employee Deferral limits: There is no change in the annual employee deferral contributions, staying at $18,000 for 2017, excluding catch-up contributions of $6,000.
  • Profit sharing contribution: 20 to 25% of business income.

How does an extra $1,000 make a difference?

Example 1: Joe contributed $1,000 monthly to his retirement account, starting at age 30 until retirement. With an annual interest rate of 5%, compounded annually, Joe retired with a nest egg of $818,698.

Example 2: Michael contributed $1,083 monthly to his retirement account, starting at age 30 until retirement. With the same interest rate and compounding frequency as that of Joe, Michael ended up with $886,650 at retirement.

An extra $1,000 per year helped Michael exceed Joe's retirement savings by $67,952.

Four Reasons to start a Solo 401k plan in 2017

  1. Higher contribution limits: A Solo 401k plan allows you to save up to $60,000 in a financial year, making it one of the quickest ways to accumulate retirement savings.
  2. Roth savings option: Unlike a traditional Roth IRAs, a Roth Solo 401k plan allows an individual with higher income to save after-tax dollars for retirement. Imagine the returns your investment could gain when invested through a tax-deferred or tax-free vehicle.
  3. Alternative investment options: When compared with a traditional retirement plan, a self-directed Solo 401k offers an opportunity to invest in alternative investments. You can invest in real estate, mortgage notes, tax liens, tax deeds, precious metals, private equity, and even personal lending along with the traditional share and bond investments.
  4. Participant loan option: A self-directed Solo 401k allows you to borrow up to $50,000 or 50% of your account balance, whichever is less, as a participant loan. This is a crucial feature for small business owners or self-employed professionals that may not qualify for traditional loans.

If you're planning to kick start your retirement savings, a self-directed Solo 401k might just be the right option for you. Seek professional advice when in doubt.

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RealEstate-IRA.jpg?width=178You attended a seminar on passive income generation with mortgage notes, learning how to enjoy high returns while sitting on your couch, and you are ready for your first purchase. But, hold on. Is this how you make your investment decisions? There is no doubt about the efficacy of mortgage notes, but you must understand them before buying your first note.

In this post, we’ll look at the basics of a mortgage note and the tax benefits of adding mortgage notes in 401k Solo retirement plans.

What is a mortgage note and how does it work?

In simple words, mortgage note is a legal agreement, involving a lender and the borrower under which, the borrower agrees to repay the loan amount along with interest in a definite period. Every mortgage note must include the names of both the buyer and the lender, descriptions of the property, the term period of the loan, the interest rate, installment amount, any legal protections favoring the borrower in case of a default, and details of previous financing, if any. If this is your first purchase, try to include detailed descriptions of the legal terms of the loan and cover any loopholes in the process. Once a deal is struck, the borrower deposits monthly repayments along with the interest to your account. You can hire a service company to manage the note and send regular payments for a monthly fee of under $100.

What are the different types of mortgage notes?

  • Fixed and adjustable mortgage rates: The most common types of mortgage notes are those with fixed and adjustable mortgage rates. As it sounds, a fixed mortgage rate comes with a fixed interest for the complete loan term, and the principal amount decreases after every single payment. On the contrary, adjustable mortgage notes have a varying rate of interest, which tends to be lower initially, and then changes in accordance with the economy.
  • FHA and VA loans: These are loans guaranteed by the government and are available through federally approved banking institutions. The credit requirements and down payment terms are strict in comparison with private lenders, although there is a guaranteed repayment, making them an attractive investment option.

Why invest in mortgage note through 401k Solo plans?

Self directed Solo 401k retirement plans are retirement solutions for small business owners and self-employed individuals, offering privileged features such as self-directed investing, checkbook control, and participant loans. According to the current IRS guidelines, a Solo 401k plan holder can invest in a wide variety of investment assets including mortgage notes, tax liens, real estate, and other untraditional investments.

What gives Solo 401k an edge is the tax-deferred growth. You can purchase mortgage notes under the name of the plan, and redirect your repayments into the account, where they enjoy tax-deferred growth until distribution. In case of Roth Solo 401k, the taxes are paid upfront and there are no taxes upon distribution, offering completely tax-free growth.

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The most prominent question that comes into your mind while choosing a retirement plan is “how much is enough.” George Foreman said, “The question isn’t at what age I want to retire, it’s at what income.” There isn’t any definitive figure that can help you survive through retirement and the best strategy is to build a fund that never ends.

For self-employed professionals and small business owners, investing in real estate with a Solo 401k retirement plan could be the answer. Real estate has always been a safe investment option with minimal management requirements. Solo 401k has gained popularity because of its freedom to invest in real estate and similar investment opportunities. For real estate professionals, investing in real estate is the safest investment choice and Solo 401k retirement plan facilitates it.


The investment landscape of Solo 401k investment plan is not only limited to real estate. One can invest in precious metals, private businesses, tax liens, tax deeds and hard money lending. It is important that every investment made with Solo 401k funds should be withdrawn from the Solo 401k account only. At the same time, the capital gains or interest from any such investments should return to the account only.

How to invest in real estate with Solo 401k?

  • Understand the eligible property clause: Before you plan to purchase a commercial or residential property, make sure that the property satisfies the legal regulations. First, neither the investor nor any other disqualified person should be the owner of the property. At the same time, the Solo 401k account owner should not use the property for primary residence or office space, or for any other personal use.
  • Open Solo 401k account: Choose a Solo 401k retirement service provider and transfer funds from your existing retirement account into the Solo 401k plan. Keep in mind that any purchase made would be under the name of the Solo 401k account.
  • Use non-recourse loan for funding: Real estate transactions require large investments and if you do not have sufficient funds; you can use a nonrecourse loan for funding. A nonrecourse loan does not require personal guarantee and it considers the property as collateral.

Once you have the loan, make sure to consult qualified attorneys for the transaction and follow all the rules. The key to achieve success with real estate investments is to comply with regulations and avoid any tax penalties in the process. 

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“Real estate investing, even on a very small scale, remains a tried and true means of building an individual's cash flow and wealth.”

Robert Kiyosaki

Real estate is one of the oldest and most trusted investment options. It offers decent returns and gives the owner a sense of satisfaction. Are you a small business owner? Investing for retirement is a wise decision and Solo 401k is one of the best available retirement plans for self-employed and small business owners.

Solo 401k is a qualified retirement plan that allows investment in real estate, precious metals, private businesses, and also traditional stock and bond investments. One of the upsides of this investment plan is the freedom to choose your investment. It offers higher contribution limits of up to $53,000 in 2015 along with catch up contributions of $6,000 for professionals above 50 years of age.


Why investing in real estate is an excellent choice for small business owners?

You can fund a real estate purchase through your Solo 401k retirement plan and if you do not have sufficient funds in your account, you can always use a nonrecourse loan. In regular transactions, the borrower has to pay a certain down payment and the rest is available through finance.

Real estate investments allow you to diversify your portfolio and look out for other investment opportunities in between. You can generate a continuous income stream by investing in rental properties or similar commercial properties.

Real estate does involve maintenance cost but you can write off wear and tear costs of a commercial property and apply for tax deductions in your income tax returns. In addition to it, you can sell the property through a 1031 exchange and save taxes against any capital gain. It is mentioned in IRS Section 1031 (a) (1):

"No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment, if such property is exchanged solely for property of like-kind which is to be held either for productive use in a trade or business or for investment."

If you are planning to purchase a property through 1031 Exchange, make sure to consult qualified professionals and make a transaction with their consent.

When investing with a Solo 401k, you may be able to skip this step and still enjoy the tax benefits. All Solo 401k accounts are tax-deferred, so you will not have to pay taxes on the capital gain until years later. Better yet, if the property is purchased with fund from a Roth Solo 401k, all gains are automatically tax-free.

Another reason why you should prefer real estate investments in your Solo 401k portfolio is their limited lookout requirements. You do not have to check the value of real estate investments regularly, especially if you are investing for a prolonged period. 

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Small business owners and self-employed individuals face multiple problems every day and the biggest one is the lack of time. It is quite common among these individual to outsource their business and personal finance responsibilities.

If you are a small business owner with a Solo 401k retirement plan, it is equally important to monitor your retirement plan, as it is to contribute. It could be lack of time or limited understanding of the investment landscape out of which, self-employed individuals let their Solo 401k provider handle everything.


Here are five signs that indicate that it is time to reevaluate your investments and hire a new Solo 401k plan provider.

Your Solo 401k Provider doesn’t offer fee disclosures

According to the Department of Labor (DOL), every single retirement plan provider charging more than $1,000 for retirement plan is bound to provide complete fee disclosures. If you never received these disclosures from your retirement plan provider, ask for them. In case the provider denies your request for fee disclosures, you can contact the DOL and fire that provider immediately.

Your retirement plan provider is overcharging for services

It is important that you pay only for the services you receive and that too within a reasonable limit. Service charges may vary depending upon the quality of service. The best way to identify the right fees is to benchmark your current services against the ones provided by the other Solo 401k providers.

You are not satisfied with administration services of your provider

For small business owners with several employees, it is important to devise an optimal retirement strategy for the company and its employees. If your retirement service provider does not help you with the strategy or provides only vague answers, it is time to look for a new provider. A well-qualified retirement plan provider dedicated towards the job would help you avoid critical planning errors and build sufficient retirement savings.

You only hear from your retirement plan provider during quarterly fee collection period

Does it sound surprising? Well, many third party administrators (TPAs) only visit their clients while collecting their quarterly fees. The problem with these TPAs is that they do not keep track of the changes in regulations governing retirement plans and things might go south for the clients. They inform only when something has already gone wrong. It is best to replace such service providers and choose a company that works proactively.

You came to know about multiple errors through an IRS audit

Solo 401k providers that lack the competence to do their job end up with several plan mistakes and unless you conduct an independent plan review, you will hear about them from the IRS only. Such mistakes can cost you thousands of dollars in penalties and taxes. It is all right to make a few mistakes but the provider must take the responsibility for the same. If your provider always has an excuse for his/her mistakes, it is time to hire a new retirement plan provider. 

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“Be slow in choosing a friend,

Slower in changing.”

Benjamin Franklin

How does this quote relate to your retirement plan? Well, a retirement plan is the only thing that will get you through your golden years and you don’t want to put your these years in the hands of someone who wouldn’t care for your best interest.

Choosing a retirement plan is an important decision for self-employed and regular employees alike. For entrepreneurs or small business owners, it takes a lot of convincing to prioritize retirement planning over the current business needs. If you are ready to start a Solo 401k plan for your retirement, it is equally important to choose a Solo 401k provider carefully. One of the key features of Solo 401k is the freedom to invest and you want all the expertise that you can get to make the right decision.


5 Factors to Consider When Choosing a Solo 401k Provider

You are going to invest and stay invested in your retirement plan for several years to come. Here are 5 important factors that you should review periodically to ensure the competency of your retirement plan provider.

  1. Investment Options: Solo 401k allows investment in real estate, private businesses, precious metals, tax liens, and several other options. However, these options differ from one provider to another and you need to inquire about these investment options upfront. At the same time, it is best to have someone who can offer appropriate investment advice and has the qualification to do so.
  2. Service Level: Just like there are two types of customers, one seeking the lowest fee and the other seeking the best service, service providers follow the same rule. If you are a business owner or self-employed individual, managing all the paperwork could get difficult. It will help to choose a provider who can take care of these matters and keep you posted accordingly.
  3. Plan Administration: There could be very few things worse than being chased by the IRS for breaking any regulations. Always look for a service provider that could perform due regulatory diligence and help you understand your responsibilities as the plan owners.
  4. Recordkeeping service: You are going to invest in different areas generating multiple transactions every time. If you are choosing a Solo 401k plan, always have a recordkeeping service to keep record of your transactions and choose one that offers on-demand reporting.
  5. Fees Disclosure: Unlike regular one-time business transactions, your retirement plan will accumulate substantial wealth and a single decimal change in provider fees will have a huge impact. Make sure that you choose a Solo 401k provider that discloses every relevant fee upfront with no hidden clauses. 
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Every small business owner requires a retirement strategy. Do you own a small business? Probably the idea of retirement planning isn’t as enticing as opening another store for your business. According to a survey conducted in 2014, nearly one-third of the small business owners didn’t want to retire whereas a quarter had no plans for retirement. More than one-third said that they would divide their retirement equally between work and leisure. Does that sound like your plans?

Here are two factors that you must consider:

  • You don’t have an employer to set up a retirement plan for you.
  • You are not likely to receive any kind of pension during retirement.

Investing in a retirement plan allows you to choose whatever path you want with more confidence.


Solo 401k: A Perfect Match for Small Business Owners

Solo 401k is a retirement plan that allows self-employed individuals and small business owners, without full-time employees, to save money for their retirement. It is important to understand that you qualify for Solo 401k plan even if you are working with your spouse.

What makes solo 401k Special?

  • High Contribution Limits: Solo 401k has higher contribution limits than IRA accounts allowing you to contribute up to $53,000 in 2015 (additional $6,000 catch up contributions for individuals above 50 years of age).
  • Flexible Investment Options: The flexibility to diversify your investments is the primary advantage of Solo 401k plan. You can invest in real estate, private business, precious metals, and other traditional investment options. In case you have a Roth option, all your investments will grow tax-free.
  • Roth Contributions: Traditional Roth IRAs do not allow contributions for individuals that make more money than a certain limit. The Solo 401k retirement plan offers freedom to pay your taxes upfront, regardless of your income. You can contribute up to $18,000 in Roth contributions for 2015 and an additional $6,000 in catch up contributions for professionals above 50 years of age.
  • Solo 401k Loan Access: The last US recession (Dec 2007 to June 2009) had a huge impact over small business owners and all the major banks scrutinized their loan access. Solo 401k is here to the rescue. It offers borrowing from retirement plan and you can borrow up to 50% of your retirement fund (maximum limit of $50,000) during financial distress. Solo 401k loan is available at prime rate plus one percent interest rate, which makes it extremely affordable.

On top of everything else, you are free to direct your investments without any intermediary. There is no need to file a return until your account balance crosses $250,000 in value. Solo 401k is a complete retirement solution for small business owners. 

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“Destiny is no matter of chance. It is a matter of choice. It is not a thing to be waited for, it is a thing to be achieved.”

William Jennings Bryan

Being a self-employed, every professional holds his destiny in his hands. Taking control of your life is the first step towards achieving success and retirement is an extremely important part of life. How do you achieve maximum benefits with your retirement plan?

Step I: Asking the right questions

Step II: Look out for best options

Step III: Analyze them and start investing your money


Top 5 Questions You Should Ask Your Financial Planner

  • What are the plans that offer maximum contributions? Solo 401k and SEP IRA are the two self-employed retirement plans with maximum contribution limits of $52,000 for 2014 and $53,000 for 2015. Solo 401k allows catch up contributions for individuals above 50 years of age whereas SEP IRA doesn’t. In short, professionals above 50 years of age can add additional $5,500 for 2014 and $6,000 for 2015 in a solo 401k plan.
  • Does it offer traditional investment options? Solo 401k retirement plans offer multiple investment options including real estate, tax liens, private business, precious metals, and regular stock and mutual fund investments.
  • What is the deadline for Solo 401k contributions?  One can make both employer and salary deferral contributions up to April 15, 2015 for the financial year of 2014 and April 16, 2016 for the financial year of 2015. One can even file an extension for contributions up to October 15 of subsequent year depending on the type of business that sponsors the plan.
  • Can a retirement plan offer financial support during off-season? For every business owner, surviving through an off-season is the toughest challenge and it takes every single dollar to push the company further. Solo 401k retirement plans are designed to accommodate any such financial urgency. One can borrow up to 50% of fund value up to a maximum limit of $50,000. This loan is available at Prime Rate plus 1 percent, which makes it an affordable source of funding.
  • Are there any downsides of Solo 401k retirement plan? The only downside of solo 401k retirement plan is that one has to file returns if the fund value exceeds $250,000. However, even then, plan holder only needs to file a quick and simple form. At the same time, Solo 401k is only suitable for small businesses with no full-time employees (employees who do not qualify for retirement plans).

It is important to understand that investment options differ from one institution to another and it is extremely important to choose a flexible plan provider for Solo 401k retirement plans. 

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“Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.”

Franklin D. Roosevelt

Franklin D. Roosevelt was able to sum together the entire thought process of real estate investors and agents in a single sentence. Real estate business is back on its track after the last recession and property prices are faring well throughout the United States.


As a real estate agent, it is quite common to ignore retirement planning and most of the agents do not have a solid retirement plan in place. In some cases, it could be lack of awareness and in others, overestimation of one’s ability to work. However, if you are to find a retirement plan that can help you in capital funding during a period of financial drought, isn’t that wonderful?

Solo 401k is a retirement plan for self-employed individuals and real estate agents can benefit a lot from it. It has comparatively higher contribution limits and one can contribute up to $53,000 in 2015 (excluding catch up contributions).

“The best time to plant a tree was 20 years ago. The second best time is now.”

Chinese Proverb

Top 3 Benefits of Solo 401k

  • Higher contribution limits: $53,000 for 2015 (excluding catch up contributions)
  • Flexible investment options: Real estate, private business, precious metals, tax liens, traditional stock and mutual funds
  • Loan Option: Borrow up to $50,000 or 50% of fund savings

For real estate agents Loan option is one of the biggest benefits.

Solo 401k Loan Option

  • Who can borrow: Every Solo 401k plan participant can borrow up to 50% of fund savings to a maximum limit of $50,000. If you have $100,000 in your solo 401k, you can borrow $50,000. However, if you have $30,000 in your solo 401k, you would be able to borrow up to $15,000 only.
  • Interest rate for loan: In most of the cases, it is prime rate (3.25%) or primate rate plus 1% interest.
  • Frequency of repayments: A solo 401k loan is repaid on a monthly or quarterly basis with at least one payment per quarter.
  • No credit qualifications: You do not have to fulfill any credit qualifications unlike regular bank loans. For realtors, it can be difficult to get a credit during a financial drought and solo 401k loans can help them get necessary funding.
  • No tax penalties: Unlike regular retirement plan, you do not have to deal with a tax penalty on borrowing from your Solo 401k until all repayments are made on time.
  • Interest paid back to the account: The best part of solo 401k loan option is its low interest rate. Plus, instead of paying interest to another lender, your interest payment will be paid directly into your Solo 401k. Essentially, you are borrowing from yourself, and paying interest to yourself.

Real estate transactions involve different types of fees and Solo 401k loan option can help you handle those. For an instance, you might need money to cover legal costs or research work in the transaction. At the same time, it can help you grab crucial real estate opportunities and offer financial support.  

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Recently, surveys show that there is a growing demand for upscale rental apartments. This presents a potential opportunity for real estate investors all over the country. Plan holders of Solo 401k accounts can also capitalize on this latest real estate trend, as it is also an opportunity to invest and grow their retirement funds.

Latest study shows that young professionals nowadays prefer renting to buying their homes. The reason is that credit market is now tightened and it is harder to qualify for a home loan. The shifting job market and the likelihood of changes in personal life such as marriage and divorce are also reasons for which young people are more hesitant to commit to a property purchase. Plus, upscale rental apartments can offer high-end amenities, such as a swimming pool or a gym. If a young professional were to buy her first home, it would be unlikely that she would be able to afford a property with such luxury.

Because of this growing trend, investors are now looking at this demand as a great investment opportunity. This demand can be capitalized by plan holders of Solo 401k accounts as well. A Solo 401k account, also known as an Individual 401k, is allowed to invest in real estate, including rental apartment buildings.

Investing in real estate with a Solo 401k, plan holders will enjoy many benefits over other retirement plan. The first benefit is the high Solo 401k contribution limit, which allows account holders to stash away up to $52,000 per year as of 2014. Plan holders who are over 50 years old can also make an additional catch-up contribution of $5,500 per year. The total annual limit for this group is $57,500. Since account holders can contribute more into this tax-deferred account, they can gather enough funds faster to invest in real estate.

If account holders do not have enough money in their retirement account even with the high contribution limit, they will still have other financing options. Unlike a traditional IRA account, a Solo 401k is allowed to use non-recourse financing for real estate purchases. If an IRA account obtains financing for their purchases, it will trigger an Unrelated Business Income Tax (UBIT). This doesn’t apply to a Solo 401k, however, and account holders can certainly leverage their investment. This is definitely a powerful advantage for upscale rental properties, which requires intensive capital up front.

Investing in rental properties is a good way to create steady passive income. The return is also more predictable, especially after the lease is signed. Not only that, with the introduction of the Solo 401k plan, now investors can use rental properties to diversify their retirement portfolio and capture the opportunities presented by this newest trend.

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4359192766?profile=originalAmericans seem to push back their retirement further and further, and sometimes not by choice. Especially for self employed small business owners and independent contractors, many dedicated all their wealth and effort to grow their business. At the end of the day, however, people still need to figure out a way to be able to retire. Self employment retirement plans and rental income can be a viable solution.

What are self employment retirement plans?

Self employment retirement plans, or often called Solo 401k plans, are created for self employed individuals. Unlike traditional retirement plans, a Solo 401k allows investments in assets other than stocks and bonds. That means rental properties, among many other options, are allowed.

Rental properties to provide income during retirement

Plan owners of self employment retirement plans can certainly look at rental properties as an income source during their retirement. Rental income is also known as a source of passive income, which means investors do not have to keep working on the investment to generate profit. This allows them to earn income when retired.

This long term investment offers good passive income that can also guard against inflation. As landlord, you can adjust the rent every year to overcome inflation rate.

To ensure a good return, here are a few things to look for in rental properties:

- Location: As true with properties, a good neighborhood will attract more buyers and renters. As a retirement investment, however, it is also wise to choose a place closer to where you live. This way, managing and maintaining the property is not too much of a hassle.

-Size and build: Decide if you would like to start with a single family home, a duplex, or larger. The size and layout of the properties need to fit with your needs. Also try to invest in newer houses, to avoid high repairing and maintaining cost and hassle.

How to finance a rental property

Start contributing to the self employment retirement plans as soon as possible. By doing so, you can take advantage of the high Solo 401k contribution limit, enjoy tax-deferred benefits, and to save up funds to finance the rental properties. Even if you don’t have enough in the Solo 401k account or do not want to pay cash up front, there are financing options available. With an IRA, the use of financing to fund a real estate purchase could trigger Unrelated Business Income Tax (UBIT). A Solo 401k, however, allows the use of non-recourse financing, tax-free.

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Real estate investors are often drawn to this market by its earning potentials and security. Many investors have successfully built their wealth upon real estate, one property after another. But what about their retirement funds? Many investors assume that retirement funds can only be invested in stock and mutual funds, and they leave it all to their custodian to manage the portfolio. This, however, is not necessarily true, as now innovative retirement solutions such as Solo 401k Plans can help real estate investors take charge of their future.

Is real estate a wise choice for retirement funds?

Most real estate investors are in for the long haul, not expecting to cash out until years later. This actually makes real estate a perfect fit for retirement planning, which often holds investment for years until account holders make withdrawals. Many investors choose to add properties to their portfolio. With these, they can collect rental payments as a steady return, while waiting for the value to appreciate over the years.

Investors who prefer fast return can also attain that with real estate investments, by engaging in house flipping. In this case, investors would purchase a property, remodel it, and sell for a profit. It involves more risk and more effort from the investor, but can potentially generate much larger returns.

The biggest advantage of adding a property to any investment portfolio is its security. Investors can always recover their initial investment by selling the property itself, so they are less likely to lose everything.

Solo 401k Plans Allow Real Estate Investment

As much as real estate professionals know about the industry, why do they still have nothing but stocks and funds in their retirement accounts? The answer is simple: not a lot of people know that retirement plans can hold other assets.

For some traditional retirement plans, it is true that investment choices are limited. However, there are innovative solutions, such as Solo 401k plans, that allow virtually any legally available investment. Plan participants can invest in real estate, including commercial and residential properties, trust deeds and notes. The plan allows high contribution limit and self-directed option, giving plan participants even more control.

Self-directed Solo 401k plans give full control to plan participants as they can now act as the trustee of their accounts and make all the investment decisions. In order to succeed however, investors need to have a good understanding of the investments they choose.

For real estate investors, obviously, real estate is the best investment choices, as the account holders have the knowledge and experience required. In these cases, adding real estate to a retirement portfolio can potentially secure and grow the portfolio more effectively. 

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