Are You Leaving Money on the Table? A Solopreneur’s Guide to Maximizing Retirement Contributions (2026)
As a solopreneur, every dollar you earn and invest has to work harder for your future. The IRS gives you powerful opportunities to save for retirement in tax-advantaged accounts, but the rules can be confusing, and if you don’t know the limits, you may be leaving money on the table. With contribution limits always changing, it’s the perfect time to review your options and learn about maximizing retirement contributions.
Whether you want the highest contribution ceiling, the simplest administration, or flexible Roth opportunities, there’s a plan designed to fit your needs. This guide breaks down the 2026 limits and shows you how to make the most of your retirement savings through IRA Financial’s specialized solutions.
2026 Contribution Limits Takeaways
- Solo 401(k): Defer up to $24,500 (employee). Total annual additions (employee + employer + after‑tax) up to $72,000, plus catch‑ups: $8,000 (50+) or $11,250 if age 60–63.
- SEP IRA: Employer contributes up to 25% of comp, capped by the $72,000 annual additions limit. No catch‑ups.
- SIMPLE IRA: Employee defers up to $17,000; catch‑ups $4,000 (50+) or $5,250 (age 60–63). Employer match up to 3% or 2% nonelective.
If you’re running a team of one (you and possibly a spouse), the Solo 401(k) typically lets you put away the most, with Roth, loan, and “Mega Backdoor Roth” options available through IRA Financial’s plan design.
2026 Quick Reference Contribution Limits (bookmark this)
- 401(k) employee deferral: $24,500
- 401(k) annual additions cap: $72,000 (excludes catch‑ups)
- Catch‑up (50+): $8,000; age 60–63: $11,250
- SIMPLE deferral: $17,000; catch‑up $4,000; age 60–63: $5,250
- Comp limit for employer calc: $350,000 (All per IRS Notice 2024‑80)
Step 1 — Pick the right plan for your situation
IRA Financial offers four small‑business owner retirement options in one place: Solo 401(k), SEP IRA, SIMPLE IRA, and ROBS, so you can match your structure and hiring plans without switching providers later.
1) “It’s just me (and maybe my spouse). I want the highest limit.” Choose the Solo 401(k)
- Why it wins: Combines an employee deferral (up to $24,500) with employer profit‑sharing, and allows after‑tax contributions for the Mega Backdoor Roth, up to the $72,000 annual additions cap (catch‑ups extra). IRA Financial’s Solo 401(k) plan also includes standard Roth option, checkbook control, and Form 5500‑EZ prep, which removes admin friction.
- Funding options: Traditional (pre‑tax) and Roth deferrals supported. Loans up to the lesser of $50,000 or 50% of your balance.
2) “I have (or will soon have) employees and want simple admin.” Go with the SIMPLE IRA
- Why it fits: Payroll deferrals up to $17,000 per employee, plus required employer match (up to 3%) or 2% nonelective. Easy setup, immediate vesting. IRA Financial supports self‑directed investing if you want alternatives beyond mutual funds.
3) “I want deductible business contributions without employee deferrals.” → SEP IRA
- Why it fits: Employer‑only contributions up to 25% of comp (subject to plan rules), capped by $72,000. Simple to run, but you must contribute the same percentage for all eligible employees. IRAF offers checkbook control or custodian‑directed setups.
Step 2 — Know your real max (with quick rules of thumb)
Employee side (Solo 401(k) & SIMPLE):
- Up to $24,500 (401(k)) or $17,000 (SIMPLE) in 2026. Catch‑ups: $8,000 (50+) or $11,250 (age 60–63) for 401(k); $3,500 (50+) or $5,250 (age 60–63) for SIMPLE.
Employer side (Solo 401(k) & SEP):
- Corporation/W‑2 wages: up to 25% of W‑2 comp (subject to the $350,000 comp cap for 2026).
- Sole prop/LLC taxed as sole prop: use IRS Publication 560 worksheets—your “25%” becomes roughly 20% of adjusted net earnings after half the self-employment tax and the plan deduction itself. (Don’t guess; use the worksheet.)
Overall cap (very important):
- The $72,000 annual additions limit covers employee + employer + after‑tax. Catch‑ups sit on top of that.
Step 3 — If you want Roth firepower, design for it
- Roth options now exist not only for 401(k) plans but also for SEP and SIMPLE plans (SECURE 2.0). Check that your provider supports them; IRA Financial does.
- Mega Backdoor Roth (Solo 401(k)): After employer + employee, you can add after‑tax dollars up to the $72,000 cap, then convert in‑plan to Roth. IRAF’s Solo 401(k) also includes this option.
Step 4 — Timing & compliance (so you don’t lose deductions)
- Adopt your Solo 401(k) by year‑end to make employee deferrals for that year; employer contributions can generally be made by your tax filing deadline (including extensions). Use IRS Pub 560 for exact timing and calculations.
- SEP IRA contributions are due by the business return due date (extensions allowed).
- SIMPLE IRA employee deferrals follow payroll‑deposit rules; employer match/nonelective is due by the business return due date.
- Form 5500‑EZ: One‑participant 401(k)s generally file when plan assets exceed $250,000. IRA Financial includes 5500‑EZ prep with its Solo 401(k).
Step 5 — Put the plan to work with IRA Financial
IRA Financial is built for owner‑operators who want control and compliance:
- Solo 401(k): flat pricing, checkbook control, mega backdoor Roth, loan feature, and free Form 5500‑EZ filing.
- Self‑Directed SEP IRA and SIMPLE IRA: enable alternative assets (real estate, private equity, crypto, metals) with checkbook or custodian control.
- One hub for small‑business retirement with an easy open‑account flow and free consultation.
Quick Chooser: Which plan leaves less money on the table?
- Max dollars, no full‑time W‑2s: Solo 401(k) (best all‑around; Roth + Mega Backdoor + loan).
- You have staff and want ultra‑simple setup: SIMPLE IRA (lower limits but easy and includes employer match).
- Profits vary and you prefer employer‑only contributions: SEP IRA (simple, big deductions, but same % to all eligible employees).
Conclusion on Maximizing Retirement Contributions
Choosing the right retirement plan for your business isn’t just about following IRS rules, it’s about creating a strategy that matches your business, your cash flow, and your long-term goals. By understanding the 2026 contribution limits, you can avoid leaving tax-advantaged dollars unused and build a stronger financial foundation for retirement.
For most solopreneurs, the Solo 401(k) offers the most flexibility and highest savings potential, but SEP and SIMPLE IRAs remain valuable tools depending on your situation. IRA Financial gives you the control, compliance, and expert support to make the process straightforward. The sooner you put your plan in place, the sooner your money can start compounding toward the retirement you deserve.
Frequently Asked Questions
How high can my “employer” contribution really go?
What if I’m age 60–63?
Can I invest beyond index funds?
Action plan for this week
- Choose a plan (likely Solo 401(k) if you’re owner‑only) at IRA Financial
- Run your numbers with Pub 560 worksheets and your CPA.
- Adopt the plan (don’t miss year‑end for deferrals).
- Design Roth/Mega Backdoor if you want tax‑free growth later.
- Book a free consult with IRA Financial to learn more and help with setup.
How to Start a Roth IRA for my Child
The ability to start a Roth IRA for your child largely hinges on whether he or she has earned income, as defined under the Internal Revenue Code. For individuals who have a business and the ability to pay their children for real, business-related work, starting a Roth IRA for a child can be a viable option. If you don’t have your own business, paying your own child is generally not realistic. In that case, you would need to wait until he or she is able to earn income independently through employment or self-employment.
Key Points
- The Roth IRA is one of the most powerful long-term savings tools for young investors
- You can start a Roth IRA for your child, but only if he or she has bona fide earned income
- So long as earned income exists, Roth IRA contributions may come from any source, subject to annual limits
The Power of the Roth IRA
The secret sauce to generating tax-free wealth at retirement starts with the Roth IRA. Mix in time and patience, and you have a powerful long-term strategy. All investments held inside a Roth IRA grow tax-free, and qualified withdrawals are not subject to federal income tax.
To qualify for tax-free Roth IRA withdrawals, the account must have been open for at least five years and the account holder must be at least age 59½, with certain limited exceptions.
Unlike traditional retirement accounts, which are funded with pre-tax dollars, Roth IRAs are funded with after-tax money. While there is no upfront tax deduction, this is generally not a disadvantage for a child earning modest income.
The earlier a Roth IRA is established and funded, the longer the assets have to grow tax-free. For example, if an IRA were established for a 15-year-old and $2,000 were contributed each year until age 70, earning an assumed annual return of 7.5%, the Roth IRA could grow to approximately $1.5 million, all potentially tax-free. By contrast, starting the same contributions at age 35 could result in a balance closer to $330,000.
This example is for illustrative purposes only and assumes consistent contributions and investment returns. Actual results will vary.
Starting a Roth IRA for Your Child
Starting a Roth IRA for a child is easier than ever. Because minors cannot legally own retirement accounts outright, a custodial Roth IRA must be established, with a parent or legal guardian acting as custodian until the child reaches the age of majority under state law.
Once the account has been opened, the child’s earned income for the year may be contributed to the Roth IRA. While the contribution itself may come from a parent, grandparent, or other source, total annual contributions may not exceed the lesser of the child’s earned income or the annual IRA contribution limit in effect for that tax year.
Roth IRA contributions are not tax-deductible and therefore do not reduce taxable income for the parent or child.
For a visual explanation of how Roth IRAs for children work, watch the video below:
The Roth IRA & Child Compensation Rules
In order to pay a child compensation for services, those services must be performed as part of a bona fide employer-employee relationship, and the compensation must be reasonable based on the nature of the work performed.
If you do not operate a legitimate business, you generally cannot pay your child for services. This does not prevent your child from contributing to an IRA; it simply means the earned income must come from another source, such as employment with a third party.
Paying a child to clean their room, do homework, or perform household chores does not constitute earned income for IRA purposes.
All wages paid to a child must be properly documented, reported, and processed through payroll in accordance with federal and state tax laws.
Depending on the business structure, wages paid to a child may be exempt from certain payroll taxes, although income tax reporting requirements still apply.
Revenue Ruling 72-23
Revenue Ruling 72-23 provides guidance on how the Internal Revenue Service evaluates an employer-employee relationship involving a parent and child.
In the ruling, the IRS considered whether wages paid by a father to his unemancipated minor child for personal services rendered as a bona fide employee were deductible as ordinary and necessary business expenses. The ruling concluded:
“Where the facts show that actual services are rendered by a taxpayer's child as a bona fide employee in the operation of the taxpayer's business, and that the compensation paid for such services is reasonable and constitutes an ordinary and necessary expense of carrying on such business, such wage payments are deductible as a business expense for Federal income tax purposes.”
As a result, the child was deemed to have earned bona fide income, making the compensation eligible for IRA contributions, while the business was allowed to deduct the wages as an ordinary business expense.
Key Factors the IRS Considers
- Wages must be paid for services rendered in a trade or business
- Compensation must be reasonable for the work performed
- The age of the child and the nature of the services are relevant
- Payments must reflect a true employer-employee relationship, not a personal allowance
- Parents must be able to substantiate the legitimacy, reasonableness, and business purpose of the compensation
Conclusion
Starting a Roth IRA for a child can be a powerful long-term planning strategy, but eligibility depends entirely on whether the child has bona fide earned income. This is straightforward when a child works for an unrelated employer and receives a paycheck. When parents employ their own children, additional care is required.
If you operate a legitimate business and your child performs real work, such as stocking shelves, assisting customers, or performing administrative tasks, and is paid a reasonable wage, establishing a Roth IRA may be appropriate. However, accounts that appear premature or unsupported by earned income may attract IRS scrutiny.
If your child is too young to work, financial education can still begin early. Using a “practice” Roth IRA example can help children understand the power of compounding and long-term investing, preparing them for responsible saving once they begin earning income.
What is a C Corporation?
A C Corporation is one of several legal entity types recognized for regulatory, tax, and official purposes under U.S. law. A C Corporation differs from other common business structures such as Limited Liability Companies (LLCs), S Corporations, and Sole Proprietorships.
C Corporations can range in size from single-owner businesses to multinational corporations with hundreds of shareholders and directors. This structure is unique because it is a separate legal and tax-paying entity distinct from its owners (shareholders). As a result, C Corporations are generally more complex to operate and maintain than other entity types, but they also provide stronger liability protection.
A C Corporation is formed at the state level and is governed by the corporate laws of the state in which it is incorporated. To form a C Corporation, you must register a business name with the state and file Articles of Incorporation. Most states also require an initial filing fee and ongoing annual or franchise fees.
Benefits of a C Corporation
Several common reasons small businesses in the United States choose to operate as C Corporations include enhanced legal protections and structural advantages. Key benefits include the following:
Capital Raising Capacity
C Corporations can raise capital by issuing and selling stock to investors. The goal is to demonstrate business growth potential so that investors believe the value of their shares may increase over time. This structure is particularly beneficial for businesses that require outside investment or plans to scale, as C Corporations can issue multiple classes of stock and have an unlimited number of shareholders.
Protection Against Liability
Many business owners choose the C Corporation structure to separate personal and business risk. In a sole proprietorship, personal and business assets are not legally separated. If the business incurs debt or is sued, the owner’s personal assets may be at risk.
A C Corporation, however, is a distinct legal entity. Generally, the corporation’s assets are at risk—not the personal assets of shareholders—provided corporate formalities are properly maintained.
Longevity and Continuity
Because C Corporations are independent legal entities, they do not automatically dissolve upon the death, withdrawal, or sale of ownership by a shareholder. Shares may be sold or transferred, and the business can continue operating uninterrupted. In contrast, certain other entity types, such as single-member LLCs, may require restructuring or dissolution depending on state law.
Silver in a Self-Directed IRA
Precious metals have always held up well in times of economic upheaval. Obviously, there's a finite amount of metal on this planet. Unlike dollar bills, you can't just create more of them. This scarcity is a major reason precious metals tend to hold their value over time. Investor and financial commentator, Jim Rogers, has previously stated that certain market downturns rank among the worst of his lifetime, and he has often pointed to silver as a potential safe-haven asset during periods of economic uncertainty.
Gold has always been the first metal people turn to; however, silver may be just as important in today’s world. Not only is silver used in jewelry and eating utensils, but it is also widely used in electronics, solar panels, medicine, and vehicles. Traditionally used as a reward for second place, silver often does not receive the attention it deserves and may warrant a closer look from long-term investors. Over the past several years, the price of silver has experienced notable growth, reflecting both investment demand and increased industrial use. This article will discuss the best way to invest in silver.
Key Points
- Although not always regarded as the top precious metal, silver should not be overlooked
- Using a Self-Directed IRA to invest may be a tax-efficient strategy
- When IRS rules are followed, silver can provide a hedge against economic uncertainty
What is a Self-Directed IRA?
Not all IRAs are the same. A Self-Directed IRA is a type of IRA structure that allows an investor to have greater control over retirement funds. It is a retirement vehicle that permits investment in a broader range of assets, including silver and other precious metals.
One of the primary reasons IRA investors turn to silver, gold, and other metals is to hedge against inflation and rising prices. Like gold, silver is often viewed as a safe-harbor investment during periods of financial stress because it is a hard asset and a store of value. It may also be viewed as an alternative to fiat currencies, such as the dollar or euro, which is why silver has historically drawn interest during inflationary periods.
Benefits of Investing in Silver in a Self-Directed IRA
Investing in silver with a Self-Directed IRA offers multiple benefits. Compared to gold, silver is generally more affordable, making it more accessible to a broader range of investors. Silver also has strong industrial demand and is used across various industries, including electronics, jewelry, and solar technology. Like gold and other precious metals, silver has a limited supply and has historically served as an inflation hedge.
These benefits make silver a popular option for Self-Directed IRA investors looking to diversify their holdings and help protect retirement assets. A Self-Directed IRA also allows investors to diversify beyond precious metals, offering access to traditional investments such as stocks and bonds, as well as alternative assets like real estate.
Tax Advantages of Buying Silver in a Self-Directed IRA
Using a Self-Directed IRA to invest in silver can offer meaningful tax advantages. In general, gains from the sale of IRA-owned silver are not subject to immediate taxation. As long as the asset remains within the IRA, income and gains grow on a tax-deferred basis in a Traditional IRA or tax-free in the case of qualified Roth IRA distributions.
For many investors, a Self-Directed IRA is an effective way to take advantage of long-term, tax-advantaged compounding.
What Types of Precious Metals and Coins Are Allowed?
Under Internal Revenue Code Section 408(m), retirement accounts are permitted to invest in certain U.S.-minted gold and silver coins, as well as specific platinum coins. Retirement accounts may also invest in gold, silver, platinum, or palladium bullion that meets required fineness standards and is held by a qualified trustee or approved non-bank custodian.
Generally, silver bullion must meet a minimum fineness of 0.999. Eligible coins and bullion must be held in the physical possession of a qualified depository or financial institution.
Examples of permitted precious metals include:
- Certain gold, silver, and platinum coins described under 31 U.S.C. Section 5112 and IRC Section 408(m)(3)
- Certain bullion coins and bars that meet IRS fineness requirements
- Precious metals that are held by a qualified trustee or approved depository
The Technical and Miscellaneous Revenue Act of 1998 expanded the rules to allow certain platinum coins and specific bullion, provided all IRS custody requirements are satisfied.
In short, IRA-owned precious metals must meet IRS purity standards and must be held by an approved custodian or depository—not in the personal possession of the IRA owner.
How to Buy Silver in a Self-Directed IRA
Full-Service Self-Directed IRA
A full-service Self-Directed IRA offers investors access to a wide range of investment options beyond those typically available through traditional financial institutions. With this structure, a specialized IRA custodian, such as IRA Financial, serves as the custodian of the IRA and executes investments at the direction of the account holder.
Income and gains generated by IRA-owned silver flow back into the IRA without immediate tax consequences. The custodian also handles required IRS reporting, allowing the investor to focus on investment decisions rather than administrative responsibilities.
Self-Directed IRA LLC with Checkbook Control
A “Checkbook Control” IRA uses an LLC that is owned and funded by the IRA and managed by the IRA holder. This structure can offer greater flexibility and faster execution for certain investments.
However, when investing in precious metals, additional IRS rules apply. IRA owners may not take personal possession of IRA-owned metals, and all precious metals must be held by a qualified custodian or approved depository. Investors considering this structure should ensure the IRA and LLC are properly established and operated in compliance with current IRS guidance.
Conclusion
Precious metals, particularly silver, continue to attract investor interest as a hard asset with both industrial demand and potential inflation-hedging qualities. As part of a diversified retirement strategy, silver can offer long-term value when held properly within a retirement account.
The tax advantages of an IRA make it a compelling vehicle for precious metals investing. Just remember that IRA-owned silver must be held by a qualified depository or financial institution and not in the personal possession of the account holder.
This information is for educational purposes only. Investors should conduct their own due diligence and consult with qualified financial or tax professionals before making investment decisions. Ultimately, it is up to you and your advisor to determine whether investing in silver aligns with your retirement goals.
Airbnb in an IRA: Will it Trigger UBTI?
An Airbnb in an IRA allows investors to use retirement funds to pursue short-term rental real estate while still benefiting from tax-advantaged growth. As you are probably aware, you can use retirement funds to invest in real estate. Of course, you must adhere to all the IRS rules, especially UBTI, when doing so. A lot depends on the type of property you own, how you earn income from it, and what type of plan you are investing in. Holding an Airbnb in your IRA has become more popular. Many investors are looking into short-term rental options, as opposed to annual commitments. Both types of investments offer the investor many advantages.
Investing in Real Estate with an IRA
Real estate has always been the most popular alternative asset for self-directed retirement account investors. These types of accounts, such as the Self-Directed IRA and Solo 401(k) plan, allow one to use retirement funds however you see fit [so long as all IRS rules are followed]. By self-directing, you are in control of your investment decisions and not limited to what a bank or other financial institution offers. So long as you don't run afoul of the IRS rules, you have greater flexibility than just investing in the usual stocks, bonds and mutual funds.
Why is Real Estate so Popular?
For one, everyone needs a place to live, work and even build on. Plus, there's only so much land to develop on this great planet. Eventually, the demand will far outweigh the supply, making it a great investment. Real estate, and other alternatives, also provide diversity in your retirement holdings. As the saying goes, don't put all your eggs in one basket. Investing everything in the stock market is not the smartest decision you can make. On the other hand, neither is putting all of your retirement funds into one real estate property.
Of course, real estate is not without its risks. Everyone remembers the housing crash just over a decade ago. However, smart investors didn't panic. Instead, they started buying up even more properties at a much better price. They knew that real estate would bounce back and it quickly did [although past performance is never guaranteed].
There's also a myriad of real estate investment options, whether it be commercial or residential. For those looking for a steady stream of income, a rental, even a short-term rental like Airbnb, is very popular. Some might look into fix and flips, while others will buy and hold. Investing in raw land for future development may suit other investors.
Lastly, real estate is a hard asset, unlike stocks, which are considered "paper" assets. It's great for one's mindset that you can physically see and touch an investment. However, when investing through an IRA, the IRA owner cannot personally perform work on the property. You also have the power to improve your property personally [when investing outside of an IRA]. Upgrading the appliances will help you receive more rent in an income property. Landscaping will raise the asking price of your flip house. Sweat equity is something real estate investors know all about.
Holding an Airbnb in Your IRA
Airbnb, along with other platforms like VRBO, have become increasingly popular across the globe. The next logical step is to look at these properties as retirement assets. Weekly and/or monthly rentals have the potential to bring in more income than an annual renter. The downside is that you need to keep the space occupied most of the time to keep the money coming in. Of course, there may be more expenses, as the rental needs to be cleaned after each stay [and managed by third-party, non-disqualified persons]. Having a full-time tenant might be a better option for many people. However, an Airbnb property can pay huge dividends.
This is especially true if you are in a desired area. Live close to the beach? Maybe you are near a theme park or arena. Perhaps, you are on the outskirts of a major city, where you can charge a little more per stay. As mentioned earlier, you need to stay within the IRS rules.
Book a free call with a self-directed retirement specialist
- Review your self-directed retirement options
- Learn about investing in alternative assets
- Get all of your questions answered
Prohibited Transactions & Disqualified Persons
The first rules, especially when real estate is involved, are the prohibited transaction rules. Specifically, it's important to note the disqualified persons facet of the Internal Revenue Code (IRC). Essentially, any investment (including an Airbnb property) cannot involve a disqualified person. Your Self-Directed IRA is the only thing that can benefit from the investment held within. Disqualified people include yourself (the IRA owner), your spouse, your lineal ascendants and descendants and entities controlled by such persons.
A disqualified person cannot benefit from an IRA-owned asset, including real estate. This means one cannot utilize the Airbnb property, nor can they earn a salary doing work for such property. Some examples:
- You cannot personally live in a property your IRA owns.
- You're not allowed to rent it out to your father, daughter or their spouses.
- You can't hire your son-in-law to manage the property.
What About UBTI?
Unrelated Business Taxable Income, or UBTI, is a tax imposed on certain investments made with retirement funds, which includes real estate. This tax, which can go as high as 37%, can make an investment tax-inefficient. In regards to real estate, the UBTI can apply in different scenarios. The first one is when you borrow money to purchase a property [such as through a non-recourse loan, which may create unrelated debt-financed income (UDFI)]. Also, if your real estate investments go far enough to make it a business, you might get hit with the tax. There is one other situation where the UBTI comes into play when holding an Airbnb in your IRA.
The IRS does not offer much guidance on the use of Self-Directed IRAs and short-term rentals, such as Airbnb, especially with respect to the UBTI rules [and determinations are often based on the facts and circumstances of each situation].
Payments for the use or occupancy of rooms and other space that render services to the occupant don’t constitute rent from real property.
Rent from Real Property:
- The use or occupancy of rooms in hotels, boarding houses, or apartment houses furnishing hotel services,
- Tourist camps or tourist homes,
- Motor courts or motels,
- Occupancy of space in parking lots, warehouses, or storage garages
Generally, services are considered rendered to the occupant if they are primarily for his/her convenience. Supplying maid service is an example of this kind of service. However, furnishing of heat and light, cleaning public entrances, exits, stairway and lobbies, etc. are not.
Therefore, it may appear that as long as you do not provide daily maid services or other convenience features like a daily breakfast [or other substantial personal services], the investment should not be treated as a hotel or motel type of income stream. As a result, it may generate rental income that’s exempt from the UBTI tax rules [although this determination is highly fact-specific].
Internal Revenue Code 469
An argument can be made that under IRC 469 – the rental income can be deemed active and not a passive investment if the average rental activity is less than seven days. Although, IRC 469 applies to the ability to take deductions under the passive activity loss rules, [and does not directly govern UBTI under IRC 512], an argument can potentially be made that if under 469 the activity is deemed active, it could be subject to the UBTI tax.
However, on the flip side, Schedule E, which is only required to be filed if the activity is passive and not active (Schedule C), does not have a day threshold as well and only focuses on level of ancillary activity. Hence, when doing short-term rentals with your Self-Directed IRA, it is important to be mindful of the potential application of the IRC 469 rules and the seven day threshold. Unfortunately, there is no direct guidance from the IRS under IRC 512 on short-term rentals.
As always, be sure to speak with a UBTI expert before engaging in such investments. Remember, the IRA Financial blog is for educational purposes, and you should always consult with a financial advisor before making any investment.
Should You Hold an Airbnb in Your IRA?
Of course, this can only be answered by each individual investor and their financial goals. Real estate will always be a popular investment. Short-term rentals, like Airbnb, are here to stay. Those with a prime location can earn some serious income for their retirement plan. Of course, you have to be wary of the IRS rules to make sure the tax benefits of the IRA are not compromised.
Investing in Farmland in an IRA
Did you know you can invest in farmland in an IRA? It’s possible to hold farmland as part of a long-term retirement strategy—while staying fully compliant with IRS rules.
The IRS does not limit what assets you can hold in an IRA; instead, it restricts how certain assets are used. Under the Internal Revenue Code, IRAs are prohibited from investing in:
- Life insurance contracts
- Collectibles, such as artwork, rugs, antiques, gems, stamps, coins (with limited exceptions), or alcoholic beverages
- Prohibited transactions under IRC §4975, which are transactions that directly or indirectly benefit you, your spouse, or other disqualified persons (including lineal ascendants and descendants)
Because of these rules, you cannot personally farmland owned by your IRA or lease it to yourself or other disqualified persons. However, your IRA can purchase farmland and lease it to an unrelated third party at fair market value or hold the land purely as an investment.
When structured properly, all rental income and any appreciation from the farmland flow back into the IRA on a tax-deferred (Traditional IRA) or tax-free (Roth IRA) basis. This makes farmland an attractive option for investors seeking diversification through tangible, income-producing assets they understand and trust.
How to Invest in Farmland in an IRA
To invest in farmland, you must use a Self-Directed retirement account, which allows alternative assets beyond stocks, bonds, and mutual funds.
There are generally two ways to structure a farmland investment within an IRA:
Traditional Self-Directed IRA
The IRA directly purchases and owns the farmland. All income and expenses must flow through the IRA, and the investment must be managed through the IRA custodian.
Self-Directed IRA with Checkbook Control (also known as a Self-Directed IRA LLC)
In this structure, the IRA owns a single-member LLC, and the LLC purchases the farmland. As manager of the LLC, you gain greater control and flexibility while maintaining IRS compliance. This structure can also provide limited liability protection and streamline investment-related transactions.
If you are self-employed or own a business with no full-time employees other than yourself and your spouse, you may also be able to invest in farmland using a Self-Directed Solo 401(k). Certain investors may also qualify to use a Self-Directed SEP IRA, depending on their business structure.
Book a free call with a self-directed retirement specialist
- Review your self-directed retirement options
- Learn about investing in alternative assets
- Get all of your questions answered
Important Compliance Considerations
When investing in farmland through an IRA:
- All expenses (taxes, maintenance, insurance) must be paid directly by the IRA or IRA-owned LLC
- All income must return to the IRA
- You and other disqualified persons may not use, live on, or personally benefit from the property
- Leases must be at fair market value and with non-disqualified third parties
Following these rules is essential to preserving the tax-advantaged status of your retirement account.
Get Started with IRA Financial
With a Self-Directed IRA, you can invest in farmland—and other alternative assets—for one flat fee. IRA Financial specializes in helping investors take control of their retirement savings while remaining fully compliant with IRS regulations.
If you want to learn more about investing in farmland with your retirement account, give us a call, schedule a consultation, or complete one of our contact forms. One of our IRA experts will guide you through the process and help you invest freely and retire confidently.
Top 5 Private REITs Investing Platforms 2026
If you’re looking to diversify beyond stocks and bonds, private REITs are one of the most powerful tools you can add to your portfolio. Pairing them with a self-directed IRA can take that strategy even further by adding tax advantages. In this article, we’ll walk through the top platforms for private REITs, what to watch for, and how a self-directed IRA, like one from IRA Financial, can enhance your retirement planning.
What Are Private REITs and Why They Matter
Private REITs, or Real Estate Investment Trusts, are investment vehicles that pool money to buy real estate such as multifamily housing, office buildings, retail centers, or industrial parks. Unlike public REITs, they are not traded on stock exchanges. They offer investors:
- A way to diversify beyond stocks and bonds
- Potential income from property distributions
- Access to institutional-grade real estate typically out of reach for individual investors
These are considered alternative assets, meaning they behave differently than traditional investments and can help reduce portfolio volatility when used strategically.
Who Private REITs Are Best Suited For
Private REITs make the most sense for investors who:
- Have a long-term horizon of five years or more
- Want income along with diversification
- Can tolerate lower liquidity since these aren’t traded daily like stocks
- May qualify as accredited investors, depending on the platform and deal
Risks and Considerations
Before investing, it’s important to understand:
- Liquidity: You usually can’t sell shares instantly, and some platforms require holding periods
- Accreditation: Many private REIT opportunities are only open to accredited investors
- Transparency and regulation: Private REITs don’t have the same reporting requirements as public REITs, so due diligence is essential
- Fees: Management and performance fees vary widely. Always check each platform’s fee schedule
Top 5 Private Real Estate Investing Platforms
Here are the top platforms to consider in 2026, listed in no particular order.
1. Fundrise
Best for: Broad access with low minimums
Fundrise allows investors to participate in private real estate through REIT-like funds with entry points as low as $10. It’s approachable for both accredited and non-accredited investors and offers diversified portfolios of private real estate assets. Annual fees are typically around 1 percent of assets under management.
Why it stands out:
- Very low barrier to entry
- Multiple portfolio strategies including income, growth, and balanced
- User-friendly platform with strong educational resources
Investor suitability: Retail and accredited investors
2. RealtyMogul
Best for: Income-focused private REITs with moderate minimums
RealtyMogul offers both project-level real estate deals and private REITs, including income-focused funds with minimum investments around $5,000. Some opportunities allow redemption after a specific holding period.
Why it stands out:
- Access to individual properties and private REITs
- Monthly or quarterly dividend distributions
- Reasonable investment minimums
Investor suitability: Investors seeking moderate entry points into private real estate
3. Yieldstreet (now Willow Wealth)
Best for: Alternative investment exposure including private REITs
Yieldstreet, rebranded as Willow Wealth, offers private market alternatives across multiple asset classes, including real estate funds that function similarly to private REITs. Some offerings require accredited status, but some managed funds are accessible with lower minimums.
Why it stands out:
- Wide range of alternative investment opportunities
- Managed fund options for diversified exposure
- Established platform with millions invested cumulatively
Investor suitability: Accredited investors seeking diversified alternatives
4. CrowdStreet
Best for: Institutional-grade commercial real estate
CrowdStreet provides accredited investors direct access to commercial real estate deals, including funds resembling private REITs. Minimum investments are typically higher, around $25,000, and the platform focuses on large-scale properties with institutional sponsors.
Why it stands out:
- High-quality institutional property placements
- Transparent underwriting
- Robust reporting tools
Investor suitability: Accredited investors with higher capital to deploy
5. Blackstone BREIT (via Private Placement)
Best for: Large-scale, professionally managed private REITs
BREIT, or Blackstone Real Estate Income Trust, is accessed through private placements and financial intermediaries. It is one of the largest private REITs and provides diversified exposure to commercial real estate managed by an experienced team.
Why it stands out:
- Managed by one of the largest alternative asset firms
- Broad property diversification
- Long track record compared with many private REITs
Investor suitability: Accredited and institutional investors comfortable with larger minimums
Book a free call with a self-directed retirement specialist
- Review your self-directed retirement options
- Learn about investing in alternative assets
- Get all of your questions answered
Real Estate Investing Inside Your Self-Directed IRA
A major advantage that often gets overlooked is placing private REITs inside a self-directed IRA with a custodian like IRA Financial.
Why it matters:
- Tax-advantaged growth: Real estate income and gains can grow tax-deferred in a Traditional IRA or tax-free in a Roth IRA
- Diversification within retirement: You’re diversifying not just your taxable portfolio but also your retirement assets
- Control and flexibility: A self-directed IRA lets you hold private REITs not available through standard brokerages
This approach is particularly useful for investors looking to combine income-producing alternative assets with long-term tax growth.
FAQs About Private REIT Investing
Q: Are private REITs liquid?
A: Generally no. They are less liquid than publicly traded REITs, and redemptions are typically limited to certain periods or minimum holding terms.
Q: Do I need to be accredited?
A: Many private REITs, especially larger deals, require accreditation. Some platform-wide funds, however, are available to non-accredited investors.
Q: What are typical fees?
A: Fees vary by platform and fund structure. They may include management, performance, or organizational fees. Always review each offering’s fee schedule.
Is a Self-Directed IRA Right for You?
If you’re serious about retirement diversification and want to leverage tax advantages, a self-directed IRA through IRA Financial can be a powerful way to hold private REITs alongside other alternative assets. With this structure, you keep control and flexibility while allowing your retirement savings to grow efficiently.
Take Action
Explore how a self-directed IRA can help you invest in private REITs and other alternative assets. Request a consultation with an IRA Financial New Accounts Specialist to understand your options, requirements, and how to get started. Strategic, flexible, and tax-efficient investing could make your retirement look very different.
This article is provided for informational purposes only and does not constitute investment, tax, or legal advice. Any rankings, ratings, or opinions expressed reflect the views of IRA Financial based on internal research, listed criteria, and publicly available data at the time of publication. Rankings are subjective and may not be suitable for all investors. Readers should independently evaluate all options and consult with qualified advisors prior to making financial decisions.
Best Retirement Accounts for Realtors
Realtors have many options when planning for retirement. While some realtors have company-sponsored retirement plans, many realtors are self-employed. The majority of real estate agents are 1099 independent contractors. This article will explore the best retirement accounts for realtors to help decide what type of plan is best for your real estate career. Understanding these options will help you choose the best plan tailored to your personal circumstances and financial goals.
Key Takeaways
- A Solo 401(k) is the best all-around option for most self-employed realtors, offering high contribution limits, Roth features, and real estate investing flexibility.
- SEP IRAs are easy to set up and a good choice for realtors who want a simple, high-limit retirement plan without employee deferrals.
- Cash Balance Plans are ideal for high-earning realtors who want to contribute over $100,000 per year and maximize tax savings.
Introduction to Retirement Planning
As a real estate agent, planning for retirement is crucial to ensure a secure financial future. Retirement planning involves creating a strategy to save and invest for the future, taking into account income, expenses, and financial goals. A well-planned retirement strategy can help real estate agents achieve their desired lifestyle and provide financial security during their golden years.
It’s essential to consider factors such as taxable income, cash flow dynamics, and tax implications when choosing a retirement plan. Real estate agents can benefit from consulting a financial planner to create a personalized retirement plan, which may include a combination of retirement accounts, such as a SEP IRA, Solo 401(k), and regular IRAs.
Best Retirement Accounts for Realtors
There are several types of retirement accounts available to real estate agents, each with its own advantages and disadvantages. These include traditional and Roth IRAs, SEP IRAs, Solo 401(k)s, and Cash Balance Plans. Traditional IRAs offer tax-deductible contributions, while Roth IRAs provide tax-free growth and withdrawals.
SEP IRAs and Solo 401(k)s are designed for self-employed individuals and offer high contribution limits, making them suitable for real estate agents with higher incomes.
Cash Balance Plans, on the other hand, offer significant tax savings and are ideal for real estate agents who have achieved substantial success in their careers. Real estate agents can also consider alternative investments, such as real estate investments, to diversify their retirement portfolio.
Self-Employed Benefits for Realtors
A vast majority of realtors are self-employed. Accordingly, a self-employed real estate professional who operates his or her own business will receive a 1099 with the commissions earned from the real estate agency. Small business owners, including realtors, can benefit significantly from retirement plans tailored to their needs.
There are many ways a realtor can be self-employed. They can be a sole proprietor, or can establish an entity, such as an LLC, C, or S corporation. The great news is that it is now better than ever to be self-employed. Not only do you have the ability to control your work/life balance, and obtain health insurance, but you also have the opportunity to supercharge your retirement savings.
Any business can establish a SEP IRA. The key is that the individual or entity establishing the plan must have a business and not just a passive activity or hobby. For example, the individual would need to file a Schedule C on Form 1040 as a sole proprietor or single member LLC or a business tax return. In addition, only earned income from the business that adopted the plan is eligible to be contributed to a SEP IRA.
SEP IRA for Realtors
A Simplified Employee Pension IRA (SEP IRA) has traditionally been the most popular retirement plan for the self-employed and small business owner. A SEP IRA is a pure profit-sharing plan that allows the employer to make up to a 25% (20% in the case of a sole proprietorship or single member LLC) profit-sharing contribution to all eligible employees up to a maximum of $72,000 for 2026, which is a $2,000 increase from 2025. A SEP IRA does not include a catch-up contribution option when you reach age 50, which is a drawback compared to the Solo 401(k). A SEP IRA is a pure profit-sharing plan which means there are no employee deferrals. So, if you earn $100,000, the most you can put away in your SEP is $25,000.
One can set up a SEP IRA up until the business files its income tax return. Contributions must be made by the tax return deadline (including extensions). SEP IRA contributions can be made in pretax Roth.
A Roth SEP IRA allows employer contributions to be made on an after-tax basis, meaning the funds grow tax-free and qualified withdrawals in retirement are also without tax. While traditional SEP IRAs are funded with pretax dollars, the Roth SEP—made possible under the SECURE 2.0 Act—gives business owners and employees the option to pay taxes upfront for potential long-term tax-free growth.
Traditional IRA contributions are also an option for individuals who exceed the income limits for a Roth IRA, offering tax deductions for contributions made within the year. The SEP IRA is a great retirement and investment plan for a self-employed realtor.
Book a free call with a self-directed retirement specialist
- Review your self-directed retirement options
- Learn about investing in alternative assets
- Get all of your questions answered
Solo 401(k) for Realtors
The Solo 401(k) plan, also known as an Individual 401(k), has surpassed the SEP IRA as the most popular retirement plan for the self-employed. It is an IRS-approved retirement plan which is suited for business owners who do not have any employees, other than him or herself and their spouses. A Solo 401(k) plan is basically a regular 401(k) plan covering only one employee. The most popular feature of the Solo 401(k) plan is the ability to make high annual contributions. Required minimum distributions (RMDs) are mandated once the account holder reaches age 73.
To be eligible to establish a Solo 401(k) plan, an investor must meet just two eligibility requirements:
- The presence of self-employment activity.
- The absence of full-time employees.
The business owner and their spouse are technically considered “owner-employees” rather than “employees”.
In 2026, a Solo 401(k) plan participant under the age of 50 can make a maximum annual employee deferral contribution in the amount of $24,500. That amount can be made in pretax, after-tax, or Roth. On the profit-sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single member LLC) annual profit-sharing contribution based on the amount of the net Schedule C amount or W-2, as applicable, up to a combined maximum, including the employee deferral, of $72,000 for 2026.
Plan participants at least age 50 can make an additional catch-up contribution of up to $7,500 as the employee increasingly the limits to $32,000 and $79,000 respectively. '
Plus, beginning in 2025, participants between the ages of 60 and 63 can take advantage of the "super" catch-up. Instead of $7,500, those individuals can increase their annual contribution by $11,250.
Solo 401(k) plans offer more control over investment choices, including the ability to invest in assets like real estate, cryptos, private placements, and more. Additionally, participants can begin taking distributions without penalties starting at age 59 1/2.
Note – if the investor reports real estate income, such as rental income, using a Schedule E on Form 1040, the real estate activity will likely not be eligible for a Solo 401(k) because it is being treated as passive versus business (Schedule C).
Related: Solo 401(k) or SEP IRA for Real Estate Investors?
SEP IRA vs. Solo 401(k): What’s Better for Realtors?
The SEP IRA is known for its ease of use. It’s ideal for realtors who want a straightforward way to save for retirement with minimal paperwork. You can contribute up to 25% of your net earnings from self-employment, up to a maximum. However, only the employer (you, as the business owner) can contribute—there are no catch-up contributions. It is best for realtors with fluctuating income who prefer a simple, low-maintenance retirement plan.
The Solo 401(k) is designed for self-employed individuals with no full-time employees other than a spouse. Unlike the SEP IRA, the Solo 401(k) lets you contribute both as the employee and employer. It also allows Roth contributions, and you can even borrow from your plan—something SEP IRAs don’t allow. This is a good option for realtors who want to contribute more, take advantage of Roth savings, or access their retirement funds via loans.
Investing in a Solo 401(k) plan also provides the flexibility to diversify your portfolio beyond traditional assets.
Bonus for Realtors: Real estate investors using retirement funds must use non-recourse loans when financing property purchases. While IRAs are subject to the Unrelated Business Taxable Income (UBTI) tax when using borrowed funds, 401(k) plans are generally exempt from this tax.
Under IRC 514, a 401(k) plan, but not an IRA, is exempt from the UBTI tax. In the case of a real estate investment, the UBTI would be triggered when an IRA uses leverage to make a purchase. Up to a 37% tax would be imposed on the income generated based off the percentage of the financed portion of the real estate property.
If you want maximum contributions and more control over your retirement savings, the Solo 401(k) is often the better choice. But if you’re looking for a low-effort, tax-deferred plan with high contribution limits, a SEP IRA may be a better fit.
Tax Implications
The tax implications of retirement plans are a critical consideration for real estate agents. Contributions to a retirement account can reduce taxable income, which can lower tax liability. The tax system operates on Marginal Income Tax Brackets, which determine the tax benefit of retirement contributions. Real estate agents can determine the tax benefit by multiplying the dollar amount contributed to their retirement plan by the marginal rate of the bracket.
Defined Benefit Plan/Cash Balance Plan
For realtors who expect to have consistent annual earnings above $150,000 for the next several years and are looking to put away over $100,000+ a year in a retirement plan, the defined benefit/cash balance plan is your answer.
A cash balance plan, a type of defined benefit pension plan, promises an employee an employer contribution equal to a percent of each year’s earnings and a rate of return on that contribution. Defined benefit plans guarantee a specific benefit at retirement to each eligible employee. In general, defined benefit plan benefits are funded over the working life of the participating employee with annual tax-deductible contributions from the employer. The employee does not make any contributions to the plan. Instead, the employer makes all contributions based on predetermined retirement benefits as outlined in the pension plan document. Based on certain complex calculations by an actuary, a defined benefit/cash balance plan can provide enormous tax benefits and retirement savings to self-employed realtors.
Conclusion
So, what is the best retirement account for realtors? For most realtors, the Solo 401(k) plan offers the greatest retirement and tax saving benefits. In addition, a Solo 401(K) plan can also contain a self-directed option allowing one to use his or her plan funds to invest in real estate as well as other traditional and alternative assets. For any realtor who expects consistent earnings above $150,000 for several years and wishes to maximize their retirement and tax advantages, the defined benefit/cash balance plan is a great option.
Retirement funds can be utilized in various investment strategies, providing significant tax-deferred income generation through real estate investments.
Realtors: Choose the Retirement Account That Works as Hard as You Do
You work hard to close deals — your retirement plan should work just as hard. Whether you want max contributions, investment flexibility (including real estate), or simplicity in setup, there’s a plan suited to your income stream and business goals. Let’s make sure you’re choosing the most powerful option for your future.
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Swanson v. Commissioner, 106 T.C. 76 (1996): What It Still Means for IRA Entity Investments
Swanson v. Commissioner remains a landmark Tax Court decision confirming that Individual Retirement Accounts (IRAs) may form and invest in entities under certain conditions. While the case continues to be widely cited in Self-Directed IRA planning, it is important to understand both its holdings and its limitations in light of current IRS regulations and enforcement trends.
Below is an overview of the case and its ongoing relevance.
Background
Mr. Swanson, the central figure in this case, structured an investment strategy involving his IRAs and newly formed corporations. He established two corporations, with his IRAs serving as the sole shareholders. Importantly, Mr. Swanson did not personally own any stock in the corporations, although he did serve as a director.
The corporations were formed at inception with IRA ownership, and no pre-existing ownership interests were transferred to the IRAs.
Key Legal Points
Initial Formation and Stock Purchase
The Tax Court ruled that the initial formation and capitalization of the corporations by the IRAs did not constitute a prohibited transaction under Internal Revenue Code Section 4975.
Why?
The court found that the purchase of newly issued stock by the IRAs did not qualify as a sale or exchange of property between a plan and a disqualified person under Section 4975(c)(1)(A). At the time of formation, the corporations were not yet disqualified persons, making the initial transaction permissible.
This distinction applies specifically to the initial capitalization of a newly formed entity.
Dividends and IRA Assets
The court also clarified that the receipt of dividends by the IRA from the corporation was not a prohibited transaction.
Why?
Dividends did not become IRA assets until they were actually declared and paid to the IRA. As such, the payment of dividends alone did not trigger a prohibited transaction, provided the distributions were made on standard, non-preferential terms.
Management Functions
Mr. Swanson’s service as a director of the corporations did not constitute a prohibited transaction.
In other words, the Tax Court held that the performance of typical management or oversight functions, by itself, did not violate the prohibited transaction rules governing IRAs. However, the ruling did not address extensive operational involvement or the provision of personal services beyond normal corporate governance roles.
Entity Status After Formation
The Tax Court did acknowledge that after formation, the corporations became disqualified persons with respect to the IRAs.
This distinction is critical. Once the entity exists and is owned by the IRA, most transactions between the IRA, the entity, and the IRA owner are subject to strict prohibited transaction limitations. Ongoing compliance is essential to preserve the IRA’s tax-advantaged status.
Takeaway
The Swanson case affirmed that IRAs have the legal capacity to form and invest in entities without automatically triggering a prohibited transaction, provided the structure is implemented correctly at inception.
At the same time, the ruling underscores the importance of continued adherence to IRS rules after formation. While Swanson provides valuable guidance, it does not grant unlimited authority for IRA owners to control or transact with IRA-owned entities. Operational conduct, ongoing transactions, and indirect benefits remain key areas of IRS scrutiny.
Careful structuring and ongoing compliance are essential to maintaining the tax-advantaged status of IRA investments.
What is a Self-Directed Account?
A Self-Directed account in the retirement account world can mean a Self-Directed IRA or a Self-Directed Solo 401(k) plan. This article will examine the key details surrounding both the Self-Directed IRA and the Self-Directed Solo 401(k).
What is a Self-Directed Account?
A Self-Directed IRA is not a legal term that you will find in the Internal Revenue Code. A Self-Directed IRA is essentially an IRA that allows for alternative asset investments, such as real estate or even cryptocurrency. Traditional financial institutions do not allow IRAs to invest in IRS-approved alternative assets, such as real estate, because their focus is on earning fees through traditional investments. Hence, the birth of the Self-Directed IRA industry. Today, the Retirement Industry Trust Association (RITA) estimates anywhere between 4-7% of all IRAs are invested in alternative assets. Accordingly, the Self-Directed IRA is the only way one can purchase alternative assets in an IRA.
How Does the Self-Directed IRA Work?
With a Self-Directed IRA, a special IRA custodian, IRA Financial, will serve as the custodian of the IRA. All types of IRAs can be used in a Self-Directed IRA structure, such as a Traditional IRA, Roth IRA, SEP IRA, SIMPLE IRA, 401(k) rollover, and even a Coverdell and HSA.
Unlike a typical financial institution which generates fees by selling products and providing investment services, a Self-Directed IRA custodian earns fees by simply opening and maintaining IRA accounts and does not offer any financial investment products or platforms. With a Self-Directed IRA, the IRA funds are generally held with the IRA custodian. The IRA owner will then direct the IRA custodian to invest the IRA funds in IRS-approved alternative asset investments, such as real estate. Title to the Self-Directed IRA asset will be in the name of the Self-Directed IRA custodian care of the IRA owner.
A Self-Directed IRA is popular with retirement investors looking to invest in alternative assets that do not involve a high frequency of transactions, such as the purchase of raw land or private fund investments.
Types of Self-Directed Accounts
The two primary options for using a Self-Directed IRA to make alternative asset investments are the (i) full-service Self-Directed IRA and (ii) the Self-Directed IRA with “checkbook control.”
Self-Directed IRA Account Full Service
With a full-service Self-Directed IRA, a special IRA custodian, IRA Financial, will serve as the custodian of the IRA. Unlike a typical financial institution which generates fees by selling products and providing investment services, a Self-Directed IRA custodian earns fees by simply opening and maintaining IRA accounts and does not offer any financial investment products or platforms.
With a full-service Self-Directed IRA, the IRA funds are generally held with the IRA custodian. The IRA owner will then direct the IRA custodian to invest the IRA funds in IRS-approved alternative asset investments, such as real estate. Title to the Self-Directed IRA asset will be in the name of the Self-Directed IRA custodian care of the IRA owner. For example: IRA Financial Trust Company CFBO John Doe IRA.
A Self-Directed IRA that is full-service is popular with retirement investors looking to invest in alternative assets that do not involve a high frequency of transactions, such as the purchase of raw land or private fund investments.
Self-Directed IRA Account "Checkbook Control"
With a Self-Directed IRA with checkbook control, an IRA is set-up with a Self-Directed IRA custodian, such as IRA Financial. The IRA is then invested into a special purpose limited liability company (“LLC”), which IRA Financial can help you establish. The Self-Directed IRA LLC is then managed by the IRA owner providing the IRA owner with “checkbook control” over the IRA funds. With a “checkbook control” Self-Directed IRA LLC, the manager of the Self-Directed IRA LLC will have the authority to make investment decisions without the involvement of the custodian. Plus, a Self-Directed IRA LLC will offer the IRA owner limited liability protection over IRA investments. Moreover, all Self-Directed IRA investments will be titled in the name of the LLC offering the IRA owner more privacy. With a Self-Directed IRA LLC with “Checkbook Control’ you will be able to buy real estate by simply writing a check.
All types of IRAs can be transferred tax-free to a Self-Directed IRA LLC. A Self-Directed Roth IRA with “checkbook control” is popular with IRA investors seeking to invest in alternative assets, such as rental properties, fixes, and flips, tax liens, or cryptocurrencies that require a high frequency of transactions.
Why Set Up a Self-Directed IRA
The Self-Directed IRA is the most popular Self-Directed retirement solution. A Self-Directed IRA is the perfect retirement or investment vehicle for anyone looking to use their IRA funds to invest in non-publicly traded securities. The primary advantages of using a Self-Directed IRA are you gain the ability to invest in almost anything you want, diversify your retirement assets, hedge against inflation, plus generate income and gains tax-free.
The Self-Directed Solo 401(k)
A Solo 401(k) plan is not a new type of retirement plan. It is a traditional 401(k) plan covering only one employee. In general, to be eligible to establish a Solo 401(k) plan, one must be self-employed or have a small business with no full-time employees (over 1000 hours during the year) other than a spouse or other owner(s).
As the name implies, the Solo 401(k) plan is an IRS-approved qualified 401(k) plan designed for a self-employed individual or the sole owner-employee of a corporation. It works best when there are no other employees or a very small number of employees.
Unlike a Solo 401(k) plan that can be opened at a traditional financial institution, a Self-Directed Solo 401(K) plan allows one to invest in alternative assets and not just stocks, just like a Self-Directed IRA.
How Does the Solo 401(k) Plan Work
The Solo 401(k) plan documents essentially control what a Solo 401(k) plan can invest in. Not all Solo 401(k) plans are the same. For example, only a Self-Directed Solo 401(k) plan will allow you to buy alternative assets, such as real estate with your plan funds. Whereas, a Solo 401(k) plan provided by a traditional financial institution, such as Vanguard, would not permit the plan to invest in alternative assets, such as real estate.
When it comes to making investments with a Self-Directed Solo 401(k) account, the IRS generally does not tell you what you can invest in, only what you cannot invest in. The types of investments that are not permitted to be made using retirement funds is outlined in Internal Revenue Code Sections 408 and 4975. These rules are generally known as the “Prohibited Transaction” rules. Other than collectibles, and transactions that involve or directly or indirectly benefit the plan participant or a “disqualified person,” one can use their 401(k) to make the investments. A “disqualified person” is generally defined as the plan participant and any of his or her lineal descendants and/or any entities controlled by such persons.
Hence, so long as the Self-Directed Solo 401(k) account plan documents allow for real estate investments and the real estate investment does not directly or indirectly benefit a “disqualified person,” real estate is a permissible Solo 401(k) investment.
Why Should I Set Up a Solo 401(k) Account?
To be eligible to benefit from the Solo 401(k) plan, investors must meet just two eligibility requirements:
- The presence of self-employment activity.
- The absence of full-time employees.
Hence, anyone with a part-time or full-time business, whether operated as a sole proprietorship, LLC, or corporation, would generally be eligible to establish a Self-Directed Solo 401(k) account, provided the business has no non-spouse common-law employees who meet the plan’s eligibility requirements.
For more information, see the IRS guidance on One-Participant 401(k) Plans.
The following are the key reasons why the Self-Directed Solo 401(k) account is the most popular retirement plan for the self-employed or small business owner.
High Contribution Limits
With a Self-Directed Solo 401(k) Plan account, in 2026, a plan participant can make contributions up to $72,000 (70,000 in 2025) annually with an additional $7,500 catch-up contribution for those age 50 and older. Plus, if you are between the ages of 60 and 63, the catch-up contribution increases to $11,250.
Under the 2026 Solo 401(k) contribution rules, a plan participant under the age of 50 can make a maximum annual employee deferral contribution of $24,500 ($23,500 for 2025). That amount can be made in pretax, after-tax, or Roth. On the profit-sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single member LLC) annual profit-sharing contribution based on the amount of the net Schedule C amount or W-2, as applicable, up to a combined maximum, including the employee deferral, of $72,000 in 2026.
For plan participants aged 50 and older, an individual can contribute an additional $7,500 in 2025, and $8,000 in 2026. That amount can be made in pretax, after-tax, or Roth. On the profit-sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single member LLC) annual profit-sharing contribution based on the amount of the net Schedule C amount or W-2, as applicable, up to the maximum.
The Self-Directed Solo 401(k) account can help business owners generate tax deductions as well as sock away a significant amount of money each year.
Loan Feature
If your plan permits loans, you may borrow from the vested balance of your 401(k) account. Internal Revenue Code Section 72(p) and the 2001 EGGTRA rules allow a plan participant to borrow money from the plan tax free and without penalty. As long as the plan documents allow for it and the proper loan documents are prepared and executed, a participant loan can be made for any reason.
A Self-Directed Solo 401(k) participant can borrow up to $50,000 or 50% of their vested account balance, whichever is less. The loan must be repaid over a period of five years or less with a payment frequency no greater than quarterly. The interest rate must be set at a reasonable rate of interest, generally based on the prime rate as per the Wall Street Journal. The Interest rate is fixed based on the prime rate at the time of the loan application.
Read More: Solo 401(k) Loan
“Checkbook Control”
One of the most popular features of the Self-Directed Solo 401k Plan is that it does not require the participant to hire a bank or trust company to serve as trustee. Instead, all assets of the Self-Directed 401(k) account are under the sole authority of the Solo 401k participant.
With a “checkbook control” Self-Directed Solo 401(k) account, you have the ability to invest in traditional as well as alternative assets, such as real estate. This structure eliminates the expense and delays associated with an IRA custodian, enabling you to act quickly when the right investment opportunity presents itself. In many cases, making a Self-Directed Solo 401(k) account investment is as simple as writing a check.
Related: What is a Checkbook Control IRA?
Flexible Contribution Options
With a Self-Directed Solo 401(k) account, contributions are completely discretionary. You always have the option to try to contribute as much as legally possible, but you always have the option of reducing or even suspending plan contributions if necessary.
Roth-Type Contributions
The IRA Financial Self-Directed Solo 401(k) account contains a built-in Roth sub-account which can be contributed to without any income restrictions. In addition, our Self-Directed Solo 401(k) account allows you to take advantage of the “mega backdoor Roth” option allowing you to reach your maximum contribution limit quicker all in Roth. The Solo 401(k) “mega backdoor Roth” option is the ultimate Roth solution.
The “Backdoor Roth Solo 401(k)” strategy allows participants to use after-tax contributions to move additional retirement savings into Roth accounts. For 2026, total contributions to a Solo 401(k) plan—including employee deferrals, employer profit-sharing, and after-tax contributions—are capped at $72,000, not including applicable catch-up contributions.
After-tax 401(k) contributions are not treated as employee deferrals or employer profit-sharing contributions and may be made only to the extent permitted by the annual contribution limit and the participant’s compensation. If the plan allows, these after-tax contributions may then be converted to a Roth 401(k) or rolled over to a Roth IRA, generally without additional tax on the converted amount.
For example, a self-employed individual over age 50 earning $70,000 could contribute $31,500 as an employee deferral (including catch-up) and approximately $14,000 as an employer profit-sharing contribution, for a total of $45,500. Depending on plan design and available contribution room, the remaining amount up to the annual limit may be contributed on an after-tax basis and subsequently converted to Roth.
Cost Effective Administration
The Self-Directed Solo 401(k) account is easy to operate and administer. There is generally no annual filing requirement unless your Solo 401(k) Plan exceeds $250,000 in assets, in which case you will need to file a short information return with the IRS (Form 5500-EZ). A Form 5500-EZ is also required in the final year of the plan, regardless of the account balance.
Secret Weapon for Real Estate Investors
Pursuant to Internal Revenue Code Section 514, a 401(k) account is not subject to the unrelated business taxable income tax (UBTI) on the use of a non-recourse loan (leverage) in connection with the purchase of real estate. An IRA that uses leverage to purchase real estate would be subject to the UBTI on the debt-financed portion of the property. The current maximum UBTI tax rate is 37%.
Tax-Deferred or Tax-Free Gains
In general, all income and gains generated from a 401(k) account will flow back to the plan without tax. That means you will pay no tax on any income or gains earned by your plan investments while they are held inside the account. Traditional plan withdrawals are subject to tax, while qualified Roth withdrawals are not.
Conclusion
Over the last several years, the self-directed account has become an increasingly popular vehicle for retirement account investors looking to gain more investment freedom and greater retirement tax savings. In addition, a self-directed account is the perfect retirement or investment vehicle for anyone looking to use their retirement funds to invest in non-publicly traded securities. The primary advantage of using a Self-Directed Solo 401(k) is that the account owner gains the ability to invest in almost anything they want, better diversify their retirement assets, hedge against inflation, plus generate income and gains without tax.