Solo 401(k) Rollover vs Contribution
Solo 401(k) rollovers and contributions are not the same, but it is a common question retirement investors ask. In this article, we look at Solo 401(k) rollover vs contribution, and the types of rollovers you can make with your retirement account(s).
- Solo 401(k) Rollovers and Contributions are two ways to fund the plan
- Rollover funds come from another retirement plan
- Contributions generally come from cash considerations, either made on a pretax or Roth basis
What is a Solo 401(k) Plan?
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, 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.
Read More: Solo 401(k) Investments
The Solo 401(k) Rollover
Can I rollover my 401(k) to a Solo 401(k)? Yes, a 401(k) can be rolled over to a Solo 401(k), under the assumption that you are eligible for a Solo 401(k) and if the funds are not Roth IRA funds. In general, you can better understand a 401(k) rollover as existing retirement funds. This can be either IRA, SEP IRA, SIMPLE IRA, 401(k), profit sharing, or other pretax retirement funds you intend on rolling over to a 401(k) or Solo 401(k) Plan.
Learn More: What is a Solo 401(k) Plan
401(k) Transfer vs 401(k) Rollover
The difference between a 401(k) or Solo 401(k) Plan transfer vs a rollover is that transfers are generally between IRA and IRA, or for inter-plan transfers. Anytime that IRA or outside qualified plan funds are transferred to a new or existing 401(k) Plan, the movement of funds is treated as a rollover. When it comes to rolling over funds to a 401(k) or Solo 401(k) Plan, you should complete a direct rollover.
Two Types of Rollovers
Direct Rollover
A direct rollover is the direct movement of retirement funds from an existing retirement custodian directly to the 401(k) Plan custodian. In other words, the rollover check must be made out to the name of the receiving 401(k) or Solo 401(k) Plan and not the plan participant. Whereas, in the case of an indirect rollover, the funds are transferred directly to the plan participant and the plan participant has 60 days to move the funds to another retirement plan.
The downside of an indirect rollover is that, in general, the payer custodian would be requited to withhold 20% of the gross amount of the funds as a withholding tax. The recipient must then make up the shortfall to avoid being subject to tax on the withholding. Therefore, when moving retirement funds to a 401(k), the individual should strive to engineer a direct rollover of funds and not an indirect rollover which would trigger a 20% withholding tax.
Remember, the check should be made out to the receiving plan. Also, make sure to use the correct terminology – a transfer essentially involves IRAs, whereas a rollover involves a 401(k) plan.
Indirect Rollover
In the case of an indirect rollover, the funds are transferred directly to the plan participant and the plan participant has 60 days to move the funds to another retirement plan. The downside of an indirect rollover is that, in general, the payer custodian would be required to withhold 20% of the gross amount of the funds as a withholding tax. The recipient would then have to make up the shortfall. Thus, when moving retirement funds to a Solo 401(k), the individual should strive to engineer a direct rollover of funds and not an indirect rollover which would trigger a 20% withholding tax. Remember, the check should be made out to the receiving 401(k) plan.
Related: Importance of Investment Diversity with Your Retirement Funds
Solo 401(k) Contribution
On the other hand, a contribution, such as a Solo 401(k) contribution, involves depositing or contributing funds to an IRA or 401(k) retirement plan from compensation earned by the payer not from existing retirement funds. For example, if an individual earns compensation from his or her self-employed business, the individual can contribute up to $72,000 if he or she is under 50 and $80,000 if he or she is age 50 or older (in 2026). Any such amounts contributed will be considered a contribution.
Whereas, if the individual has an existing IRA or 401(k) plan, the amount of retirement funds that are moved into the 401(k) would be treated as a rollover. Unlike a 401(k) contribution, there are no limitations or minimums on the amount of funds that can be rolled into a 401(k). The only time limit imposed is on the amount of annual contributions that can be made – not rolled over.
For example, if Joe is 55 years old and has a traditional IRA of $75,000, Joe can roll those IRA funds into a new Solo 401(k) plan he adopts for his new self-employed business. Whereas if Joe earns $22,000 in compensation from his new business, Joe can only contribute $22,000 to the plan.
In other words, there is no limitation on the amount of pretax IRA or qualified plan retirement funds that can be rolled into a 401(k), while, in the case of a Solo 401(k) contribution, an annual contribution limitation exists.
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Top Tips to Convert a SEP IRA to a Solo 401(k) for Self-Employed Success
Looking to convert a SEP IRA to Solo 401(k)? This article will show you the main benefits of converting and provide a step-by-step guide to make the process seamless.
Key Takeaways
- Converting a SEP IRA to a Solo 401(k) provides higher contribution limits, allowing for greater retirement savings potential through dual contributions of salary deferral and employer contributions.
- Solo 401(k) plans offer enhanced flexibility in investment options and the ability to borrow against the account balance, which are not available with SEP IRAs.
- The conversion process includes establishing the Solo 401(k), transferring funds through a direct rollover, and adhering to IRS tax reporting requirements to avoid penalties.
Understanding the Basics of SEP IRA and Solo 401(k)
Grasping the essentials of these retirement accounts is crucial prior to getting into the conversion process from a SEP IRA to a Solo 401(k) plan. Both options cater specifically to self-employed professionals and owners of small businesses, providing advantages that are customized for their circumstances.
The Simplified Employee Pension IRA (SEP IRA) grants business proprietors the ability to make contributions that can be deducted from taxes, with earnings on those contributions accumulating free of tax until funds are taken out during retirement. Conversely, a Solo 401(k) plan is intended predominantly for sole proprietors as well as independent consultants and companies with only employee - the owner (or perhaps a spouse). It offers an opportunity for higher contribution limits compared to SEP IRAs, along with more diverse investment choices and straightforward management processes.
What is a SEP IRA?
A SEP IRA serves as a retirement savings plan tailored for self-employed individuals and proprietors of small businesses. This type of account allows business owners to make contributions that are tax-deductible on behalf of their staff, themselves included. Among the standout features of SEP IRAs is their lofty contribution ceiling, which has been set at $72,000 or 25% of an employee’s earnings—whichever figure is lower for 2026.
Any entrepreneur who employs others—even if it’s only one other person—or those running solo operations can create a SEP IRA. These accounts share some similarities with traditional IRAs in that contributions deducted from taxes and investment growth remain untaxed until funds are withdrawn during retirement, presenting an attractive option for accumulating retirement reserves.
Despite these advantages, there exists a limitation wherein contributions are tied to a proportionate amount relative to employee paychecks. This may pose restrictions when compared to other smaller-scale retirement vehicles such as Solo 401(k)s due to its intricacy and potential administrative costs incurred by participants managing these plans alone.
What is a Solo 401(k)?
A Self-Employed 401(k), also known as a Solo 401(k)k, serves as a retirement savings plan tailored for small business owners who do not have employees other than perhaps their spouse or other owners. This type of plan is available to various self-employed individuals including sole proprietors, independent contractors, partnerships, and owner-only corporations. The contribution structure of the plan allows participants to put aside funds through both salary deferrals and employer contributions—this leads to potential higher limits on overall retirement savings and the ability to reach the maximum faster when compared with those possible under a SEP IRA.
The ability to choose from an array of investment options stands out as one of the primary benefits of participating in a Solo 401(k) plan. Business owners can select investments such as stocks, bonds, mutual funds or even alternatives, like real estate and cryptos, according to what best aligns with their individual retirement objectives.
Savers can choose a traditional Solo 401(k), which offers an immediate tax break, or a Roth Solo 401(k), which features qualified tax-free withdrawals from the plan.
Reasons to Convert from a SEP IRA to a Solo 401(k)
Transitioning from a SEP IRA to a Solo 401(k) could substantially improve the prospects of your retirement savings. For self-employed individuals and owners of small businesses, the Solo 401(k) stands out due to its elevated contribution limits, provisions for loans, and wider range of investment choices.
Adopting a Solo 401(k) allows you to harness these features to bolster your nest egg for retirement, aiming for greater financial security as you look ahead. We shall dive into the merits that make this option so advantageous.
Higher Contribution Limits
One of the key incentives to transition from a SEP IRA to a Solo 401(k) is the opportunity for increased retirement savings due to higher contribution limits. The Solo K permits you to increase your total contributions by making both employee salary deferrals on a pro rate basis and employer contributions, which collectively can exceed what’s possible with a SEP IRA.
SEP IRAs only allow for employer contributions. Smaller businesses cannot take full advantage as the SEP since contributions are directly related to your compensation. For example, if you're over 50 and make $100,000 in self-employed income, you may contribute up to $25,000 (or $20,000 depending on the entity type). If you had a Solo 401(k), you could contribute the full annual 401(k) limit, which is $32,500 for 2025, as the employee of the business, plus 20 or 25% of the total income as the employer.
Plus, SEP IRAs do not have catch-up contributions. Therefore, individuals age 50 and older cannot make additional contributions as they near retirement. This is a major drawback for those who want to increase their retirement wealth.
To fully capitalize on building wealth for retirement through a Solo 401(k) plan, it’s beneficial to employ strategies that involve both types of contributions. By leveraging this combination effectively, you’re poised to considerably amplify your retirement funds and secure ample financial resources down the line.
Loan Provision
Switching to a Solo 401(k) offers the distinct advantage of being able to take loans from your account balance, an option not available with SEP IRAs. With a 401(k) plan, you can tap into up to half of your vested balance, subject to a cap of $50,000, providing crucial financial support when necessary. For example, if you have $40,000 in your plan, you may borrow up to $20,000 and use it for any reason. Just make sure to pay it back while adhering to IRS rules.
The loan feature enhances the versatility of the Solo 401(k) as a retirement plan by offering access to funds without incurring tax penalties and avoiding the constraints typically imposed on early distributions from other types of retirement accounts like IRAs.
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Flexible Investment Options
A Solo 401(k) generally offers greater investment flexibility compared to a SEP IRA, presenting an extensive array of investment choices. You can choose traditional options like stocks, mutual funds, and ETFs, or nontraditional (or alternative) assets such as real estate, precious metals, cryptos, and private equity. This wide selection enables you to craft your retirement strategy in alignment with your unique goals and comfort level with risk.
Through diversifying your holdings, it’s possible to enhance the growth prospects of your portfolio while simultaneously mitigating risk. The inclusion of alternative investments like real estate bolsters both the adaptability and potential for expansion of your retirement savings.
It's important to note that you must carefully consider your plan provider, as not all providers are the same. Make sure they offer full anonymity with respect with the investments you can make. Also, make sure to scrutinize the fee schedule before deciding on a custodian. Lastly, while not many custodians allow you to self-direct a SEP IRA, IRA Financial is one of the few providers that do! Whether you choose to utilize a Solo 401(k) or SEP IRA, you can make the same types of investments.
Steps to Convert a SEP IRA to a Solo 401(k)
One of the main reasons for converting a SEP IRA to a Solo 401(k) (or vice versa) is because of the makeup of your business. As mentioned, Solo 401(k) plans are limited to owner-only business. You cannot employ full-time non-owner employees. While SEP IRAs can be used by self-employed individuals, they are generally used by businesses with employees. The TL;DR is that Solo 401(k) plans are better for owner-only businesses, while SEP IRAs are perfect for small business owners.
The transition from a SEP IRA to a Solo 401(k) can be seamless with meticulous planning and implementation. The process primarily involves setting up the Solo 401(k), moving funds appropriately, and adhering to all necessary tax reporting obligations.
It’s essential to grasp each stage thoroughly to circumvent any possible complications and maximize the benefits of switching to a Solo 401(k). We will delve into every step more comprehensively.
Establishing a Solo 401(k) Plan
Initiating the transition from a SEP IRA to a Solo 401(k) requires you first to set up the Solo 401(k) plan. This process is facilitated by financial institutions proficient in administering retirement plans, such as IRA Financial, which offer assistance and required paperwork for effective establishment of your plan.
Handling a Solo 401(k) requires greater attention to paperwork and meticulous record maintenance than does managing a SEP IRA. It’s crucial to maintain accurate records pertaining to contributions and withdrawals as part of adherence with IRS rules, thus circumventing possible penalties.
Transferring Funds
After setting up your plan, proceed by moving the money from your SEP IRA to your Solo K. To avoid any tax consequences and fines, carry out a direct rollover. Begin the rollover procedure by reaching out to your SEP IRA's administrator so they can transfer the funds straight into your Solo 401(k).
If you take possession of the funds, ensure you finalize this rollover within a span of 60 days to avoid penalties. It’s also critical that you grasp both the tax repercussions and reporting obligations associated with this process to prevent possible complications with the IRS.
Tax Reporting Requirements
It’s critical to adhere to correct tax reporting procedures when transitioning in order to avoid any fines. Be well-informed about the filing mandates stipulated by the IRS and dutifully submit all required documentation within the set deadlines. For instance, should your Solo 401(k) funds exceed $250,000, you are obligated to file Form 5500-EZ.
Keeping precise logs of every payroll activity and contribution is imperative for staying in line with IRS rules. By doing so, you’ll be able to avoid possible penalties while ensuring an effortless shift into your new retirement plan that must be diligently upheld.
Potential Challenges and How to Overcome Them
Transitioning to a Solo 401(k) can bring about several advantages, but one must also be prepared to navigate potential difficulties. It’s essential for individuals and small businesses that are self-employed to grasp these complications and the strategies for managing them effectively. Among these challenges are the intricate administrative responsibilities and adhering strictly to IRS regulations, which encompass grasping taxes related to self-employment.
Administrative Complexity
Managing a Solo 401(k) can be daunting due to the substantial administrative responsibilities involved. The necessity of meticulously tracking contributions and keeping comprehensive records adds complexity and time consumption, which could potentially result in errors if not handled with care.
To mitigate this obstacle, it might be beneficial to engage a specialized Solo 401(k) plan administrator who is adept at simplifying these tasks while simultaneously ensuring adherence to all IRS stipulations. Establishing thorough record-keeping practices from the beginning will aid in handling the administrative duties effectively.
Compliance with IRS Rules
Adhering to the rules set by the IRS becomes a considerable obstacle when transitioning to a Solo 401(k). You’re mandated to engage in tax reporting if your account exceeds $250,000, upon termination of the plan, or if there’s an eligible employee present. Ignoring these directives could lead to substantial fines.
To guarantee compliance, remain informed about current IRS submission requisites and deadlines for tax filing. It might be beneficial to seek assistance from a seasoned tax professional who can guide you through the intricacies of tax reporting and ensure that all required paperwork is filed punctually.
Maximizing Benefits Post-Conversion
Upon transitioning to a Solo 401(K), optimizing your retirement plan is crucial for growing your nest egg. Smartly managing investments and carefully scheduling contributions can substantially boost the growth of your retirement savings.
It’s essential to hone in on strategic contribution allocation, broaden your investment portfolio, and prepare for required minimum distributions as you aim to secure a solid financial foundation with your Solo K for when you retire.
Optimizing Contributions
Maximizing your contributions is key to enhancing your retirement savings. Take advantage of the higher contribution limits by making both salary deferral and employer contributions. This dual contribution approach can significantly boost your retirement savings. Once you reach the age of 50, increase your contributions thanks to catch-up contributions.
Strategically planning your annual contributions throughout the same calendar year will help you decide how to contribute to the maximum limits and ensure you are making the most of your retirement plan type.
Diversifying Investments
It is essential to spread your assets across different asset classes, as this can heighten the likelihood of growth and diminish exposure to risk. Constructing a diversified portfolio that includes an array of investments like equities, fixed-income securities, and alternative options ensures balance with an emphasis on advancement.
To ensure that the strategy you have in place for your Solo 401(k) remains effective in leveraging its advantages for future financial stability involving cash and money reserves, it’s important to consistently evaluate and modify your investment approach in response to evolving economic landscapes. This will assist you in assessing whether your current methods are well-suited for achieving optimal results.
Planning for Required Minimum Distributions (RMDs)
Ensuring that you manage your required minimum distributions (RMDs) is critical to avoid hefty tax penalties. When you reach 73 years of age, it becomes mandatory to withdraw RMDs from your 401(k) by April 1st of the subsequent year, and by December 31 every year after. Neglecting this obligation can lead to severe fines that may heavily deplete your retirement savings.
For concise handling of RMD obligations, consistently monitor both the balance in your account and anticipated distribution amounts. It’s advisable to seek guidance from a financial advisor who can assist in crafting an approach designed not only to comply with RMD regulations but also to reduce the potential tax burden on your funds earmarked for retirement.
Summary
When you convert a SEP IRA to a Solo 401(k), it may considerably boost your potential for retirement savings by providing you with increased contribution methods, varied investment choices, and the possibility of taking out loans. Understanding the necessary procedures will help facilitate an efficient changeover and allow you to fully capitalize on the advantages offered by your upgraded retirement plan.
It’s essential to grasp fundamental concepts, devise an informed strategy, and follow all IRS regulations when converting. Seize the opportunities presented by a Solo 401(k) and actively work towards ensuring financial security for a thriving retirement future.
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Frequently Asked Questions
What is the main advantage of a Solo 401(k) over a SEP IRA?
Can I convert my SEP IRA to a Solo 401(k) without incurring taxes?
What are the contribution limits for a Solo 401(k) in 2025?
Are there any administrative challenges in managing a Solo 401(k)?
When do I need to start taking RMDs from my Solo 401(k)?
Solo 401(k) Rules for a C Corporation
There is a common misconception that only a sole proprietor can establish a Solo 401(k) plan. However, the truth is that anyone that is self-employed, whether they are a sole proprietor or have a business with no non-owner full-time employees can establish a Solo 401(k). This article will explore the Solo 401(k) rules for a C Corporation so that you better understand how you can save for retirement as a small business owner.
Solo 401(k) plans fall under the broader category of qualified retirement plans, which include various types such as 401(k), cash balance, and defined benefit plans. These plans offer tax advantages provided by the IRS and have compliance requirements to ensure benefits for all participants.
Key Takeaways
- Solo 401(k) plans aren’t just for sole proprietors—C corps with no full-time employees (other than owners/spouses) can establish and benefit from them.
- For 2026, total contributions can reach up to $83,250, combining employee deferrals and employer contributions, with Roth and after-tax options available.
- Contributions are tax-deductible for the business, deadlines align with corporate tax filings, and plan administration is straightforward, offering powerful savings potential.
What is a Solo 401(k)?
A Solo 401(k) plan is essentially a 401(k) plan for a business that has no full-time employees other than the business owner(s) and their spouse(s). Having eligible employees restricts the use of a Solo 401(k) and requires a traditional 401(k) plan. It is perfect for any sole proprietor or small business with no full-time employees.
The type of business entity can affect eligibility and contribution limits. A non-owner full-time employee is anyone that does not work more than 1,000 hours during the year or three consecutive years of 500 hours.
What is a C Corporation?
A corporation is formed under the laws of a particular state by filing articles or organization with the Secretary of State in the relevant state. A standard corporation is known as a C Corporation. It conducts business, realizes net income or loss, pays taxes and distributes profits to shareholders. The profit of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. This is known as a two-layer of tax or double tax. A C Corporation is not a flow-through entity like an LLC or an S corporation. As a result, it is not the most common entity type for small businesses with no employees.
Ownership of a C Corporation is evidenced through the issuance of stock certificates to shareholders. Shareholders have legal rights to the distribution of corporate profits. An employee of a C Corporation, including any owner, will receive a W-2, which displays the annual income earned from the business. Contributions to a Solo 401(k) can be classified as a business expense for tax purposes.
Contributions can be made up until the tax filing deadline for the corporation.
Eligibility and Requirements
To be eligible for a Solo 401(k) plan, an individual must be a self-employed business owner with no employees other than their spouse. This includes sole proprietors, single-member limited liability companies (LLCs), and other small business owners. The business owner must have self-employment income, which is defined as net earnings from self-employment after deducting self-employment tax and other business expenses. The Internal Revenue Code (IRC) sets the rules and requirements for Solo 401(k) plans, including the contribution limits and eligibility requirements. This makes the Solo 401(k) an attractive option for self-employed individuals looking to maximize their retirement savings while benefiting from significant tax advantages.
Types of Solo 401(k) Contributions for a C Corporation
The most popular benefit of the Solo 401(k) plan is the high annual maximum contributions. It is a profit-sharing plan, but it also has the employee-deferral feature, which will be highlighted below. The plan allows for both profit sharing contributions and maximum employer contributions, making it a versatile option for retirement savings.
Individuals aged 50 and over can make catch up contributions, allowing them to contribute additional amounts beyond the standard limits to enhance their retirement savings. New for 2025 - the "super catch-up," which allows savers between the ages of 60 and 63 to save even more.
There are generally two types of categories of Solo 401(k)-type contributions: the employee deferral and the profit sharing contribution. Here's the low-down of each:
Employee Deferral: The majority of employees make pretax employee deferral contributions which are tax deductible. Under the 2026 Solo 401(k) contribution rules, a 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. Plan participants who are at least age of 50 can make a maximum annual employee deferral contribution in the amount of $32,500, which factors in the catch-up contribution of $8,000. If you are between the ages of 60 and 63, that amount is increased to $11,250, for a total of $35,750.
Profit Sharing: Through the role as the employer, an additional contribution can be made to the plan in an amount up to 25% of the participant’s W-2. Employer contributions are made by the business and are also 100% elective but must be made prior to the business filing its tax return. Employer contributions are also known as “profit sharing” contributions and can now be in Roth, in addition to pretax and after-tax. Profit sharing contributions are essentially a percentage of the plan participant’s W-2 amount, guaranteed payment, or net Schedule C amount, depending on your business type.
Total Contribution: The sum of employee deferrals and employer contributions cannot exceed the IRC 415 limit for 2026 which is $72,000 or $80,000 for persons age 50 and older. If you are between 60 and 63, your contributions must not exceed $83,250.
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Roth Contributions
Solo 401(k) plans allow for Roth contributions, which are made with after-tax dollars. This means that the contributions are subject to income taxes, but the earnings grow tax-free and are not subject to income taxes when withdrawn in retirement. Roth contributions can be made by both the employee and the employer, and are subject to the same contribution limits as traditional contributions.
The decision to make Roth contributions depends on the business owner’s individual tax situation and retirement goals. For those who anticipate being in a higher tax bracket in retirement, Roth contributions can offer significant tax benefits. That being said, if you are 50 or older and made over $150,000 in the previous year, the Secure Act 2.0 requires all catch-up contributions to be made in Roth.
The Solo 401(k) Plan Contribution Rules for a C Corporation
For the 2025 taxable year, a C corporation is required to file IRS Form 1120 (U.S. Corporation Income Tax Return) as well as the state-related tax form by April 15, 2026, or October 15, 2026, if an extension is filed. A business owner that operates his or her business as a C corporation can establish a Solo 401(k) plan for the 2025 taxable year up until the business files Form 1120.
Contributions can be made up until the tax filing deadline, which is typically mid-April, or later if an extension is requested.
Obviously, if you want to take full advantage of the annual contribution limits, you should establish your plan before the end of the year. Get started now to have your plan ready for this year and beyond.
Retirement Plan Administration
Administering a Solo 401(k) plan requires compliance with the IRC and other regulations. This includes maintaining accurate records, filing annual reports with the IRS, and ensuring that the plan is operated in accordance with its adoption agreement. The plan provider, such as a financial institution or third-party administrator like IRA Financial, can assist with plan administration and ensure compliance with regulatory requirements.
The business owner is responsible for making contributions, investing plan assets, and taking distributions in accordance with the plan’s rules and regulations. It’s essential to understand the rules and regulations surrounding Solo 401(k) plans to maximize the benefits and minimize the risks. Proper administration ensures that the plan remains a valuable and compliant retirement savings vehicle.
Conclusion
The Solo 401(k) plan is the most popular retirement plan for the self-employed, including shareholders of a C corporation, that do not have any full-time employees other than the shareholders or their spouses. The plan offers various investment options, allowing participants to choose from a wide range of assets. In addition to high annual contribution options, the plan allows a plan participant to invest in alternative assets, borrow up to $50,000 tax- and penalty-free, max out Roth contributions via the “Mega Backdoor” Roth strategy, plus it has very simple annual administration requirements. The plan can also include contributions made by the business owner's spouse, enhancing the overall savings potential for the family.
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Frequently Asked Questions
Can a C Corporation establish a Solo 401(k) plan?
What are the Solo 401(k) contribution limits for C Corporation owners in 2025?
When is the deadline for a C Corporation to make Solo 401(k) contributions?
SECURE Act 2.0 & New SEP Roth IRA Contributions
On December 29, 2022, President Biden signed into law the Securing a Strong Retirement Act, known as the “SECURE Act 2.0." This legislation includes provisions from the House of Representative’s initial version of the SECURE Act 2 and two Senate bills - the EARN Act and the RISE & SHINE Act. SECURE Act 2.0 covers over 90 provisions related to retirement accounts in over 400 pages. It follows the original SECURE Act and has been met with overwhelmingly positive feedback in the retirement and tax industry. Several provisions in the Act have received quite a bit of media attention, such as increasing the RMD age to 73. However, numerous other provisions in the bill will have a real impact on retirement savers, such as the new Roth employer contribution options for SEP IRAs.
- The SEP IRA is a popular retirement plan among small business owners
- SECURE Act 2.0 contains provisions related to the SEP that could make it even more popular
- You can now make employer contributions to an after-tax Roth account
What is a SEP IRA?
A Simplified Employee Pension (SEP) is a profit-sharing plan that allows any business to establish for the benefit of its employees. In 2026, the maximum one can contribute to a SEP IRA is $72,000. As a profit-sharing plan, a sole proprietor or single-member LLC can make a maximum contribution of 20% of each eligible employee’s compensation up to the limit. Whereas, in the case of a corporation or partnership, the maximum contribution percentage is 25% of each eligible employee’s W-2, or guaranteed payment in the case of a partnership.
An eligible employee for a SEP IRA is an individual (including a self-employed individual) who meets all the following requirements:
- Has reached the age 21
- Has worked for the employer in at least 3 of the last 5 years
- Received at least $750 in compensation for 2025
SEP IRA Contributions Tax Rules Pre-2023
A SEP IRA can generally receive only employer contributions and generally cannot allow for employee elective deferrals like a 401(k) plan. SEP IRA employer contributions must be made to a traditional (pretax) IRA; a Roth IRA cannot be used. The contributions are made by the employer to the employee and vest immediately. Therefore, the employer receives an income tax deduction for the SEP IRA contribution. In the case of the employee that receives the employer profit-sharing contribution, any SEP IRA distribution taken after the age of 59 ½ would only be subject to ordinary income tax.
SEP IRA Contributions Tax Rules For 2023 & Beyond – Hello Roth
Thanks to Section 601 of SECURE Act 2.0, beginning on January 1, 2023, SEP IRA employer profit-sharing contributions can now be designated as a Roth IRA. The provision states that the employee must elect for the contributions made by the employer to be treated as made to a Roth IRA. It also appears that an employer would not be required to offer the Roth election.
One wrinkle to electing to receive employer Roth contributions is that SEP IRA participants should be aware that an election to receive contributions in Roth will trigger current taxation, even though they are employer contributions. Any designated Roth contribution made by the employer on the employee’s behalf is required to be included in the employee’s taxable wages as reported on Form W-2. Just like pretax contributions, which are tax-deductible to the employer, SEP Roth IRA contributions would be tax-deductible. In addition, any non-elective designated Roth contributions made by the employer are required to be fully vested.
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In essence, the SEP Roth IRA contribution option will allow the employee to have the chance to elect when they wish to pay the tax on the funds - on grant or upon distribution. Another way to look at the SEP Roth IRA option is to think of it as a Roth conversion, without the actual conversion taking place. The amount of the SEP IRA Roth contribution would be subject to tax just like a conversion.
One other issue that needs to be addressed by the IRS in connection with Section 601, is will a SEP Roth IRA contribution impact the amount of Roth IRA contributions that are available to the employee to be made individually. There is a thought based on how the provision is drafted the SEP IRA Roth employer contribution will reduce the amount that may be made by an individual to a separate Roth IRA for that year. This language does not impact the traditional IRA contribution limits. However, it is unclear whether this what the intent of the provision. We can expect the IRS to address this and other issues raised herein in the coming months.
Conclusion
Section 601 of SECURE Act 2.0 allowing SEP IRA employer contributions to be made in Roth provides employees greater control over the tax treatment of their funds. The fact that Roth employer contributions provided to the employee would be taxable will likely make the option somewhat unpopular. Nevertheless, the provision is worth understanding as the benefits of a Roth retirement plan are superior. All qualified distributions from a Roth are tax free. Who likes paying taxes? Generally, you're better off paying them before you contribute rather than at the time of distribution since the earnings generated by your investments are also tax-free. It's up to you, and your particular situation, to decide whether or not you wish to make Roth contributions to your SEP.
Why Choose a Solo 401(k) vs. SIMPLE IRA?
A SIMPLE IRA is similar to a Solo 401(k) plan in that it is funded by employee deferrals and additional employer contributions. However, unlike a Solo 401(k) Plan, a "SIMPLE" plan uses an IRA-type trust to hold contributions for each employee, rather than a single plan trust that is typical of a traditional employer 401(k) plan. It can be opened with a bank, insurance company or other qualified financial institution. But who wins the debate: Solo 401(k) vs. SIMPLE IRA?
Since 2001, the Solo 401(k) plan has overtaken the SIMPLE IRA as the most popular retirement plan for the self-employed or small business with no full-time employees (over 1,000 hours or three consecutive years of 500 hours). This article will examine the reasons why the Solo 401(k) is so much more popular than the SIMPLE IRA, despite its higher administrative burden.
Key Takeaways
- You can put away much more money each year with a Solo 401(k) than a SIMPLE IRA — nearly three times more in some cases.
- Solo 401(k) plans let you borrow from your account, make Roth contributions, and invest in things like real estate without needing an LLC.
- SIMPLE IRAs are quick to set up and don’t require as much paperwork, but they come with lower limits and fewer investment options.
Introduction to Retirement Plans
Retirement plans are an essential component of a small business owner’s financial strategy, providing tax benefits and a means to save for the future. As a small business owner, it’s crucial to understand the various types of retirement plans available, including the 401(k), SIMPLE IRA, and SEP IRA. Each plan has its unique features, contribution limits, and eligibility requirements.
For instance, a 401(k) plan offers higher contribution limits and a range of investment options, while a SIMPLE IRA is easier to administer and suitable for businesses with fewer employees. SEP IRAs, on the other hand, are ideal for self-employed individuals due to their flexibility and high contribution limits. Understanding these differences can help you choose the right retirement plan that aligns with your business needs and financial goals.
SIMPLE IRA
A SIMPLE IRA (Savings Incentive Match PLan for Employees) plan can be established by any employer who has less than 100 employees, who will receive at least $5,000 in compensation from the employer in the proceeding calendar year. The SIMPLE IRA plan has a lower deferral limit than a Solo 401(k) plan. However, unlike a Solo 401(k) plan, the SIMPLE IRA plan uses an IRA-style trust to hold contributions for each employee, rather than a single plan like a 401(k) or other qualified retirement plan.
For example, each employee of a business that adopted a SIMPLE IRA can have their own SIMPLE IRA account, which offers the SIMPLE IRA participant far greater investment options. Employers are required to make a matching contribution or a non-elective contribution to the SIMPLE IRA.
Solo 401(k)
A Solo 401(k) plan is an IRS-approved retirement savings vehicle designed specifically for self-employed individuals or small business owners who have no full-time employees other than themselves, a spouse, or business partners. This plan is also referred to as an Individual 401(k), Self-Employed 401(k), or Owner-Only 401(k). Despite the variety of names, it is not a new type of retirement plan—it is essentially a traditional 401(k) that has been adapted to suit businesses with only one participant.
A Solo 401(k) allows for both employee and employer contributions, enabling business owners to contribute more toward retirement than they typically could with other plans like a SEP IRA or SIMPLE IRA. Contributions can be made on a pretax (traditional) or after-tax (Roth) basis, giving plan participants added flexibility in how they manage current tax liability and future retirement income.
Before the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) took effect in 2002, there wasn’t much incentive for self-employed individuals to adopt a Solo 401(k). Other plans, such as profit-sharing plans or SEP IRAs, offered similar contribution limits without the complexity of a 401(k). However, EGTRRA significantly increased the annual contribution limits and allowed for employee salary deferrals in addition to employer profit-sharing contributions, making the Solo 401(k) a far more powerful retirement planning tool.
Thanks to these changes, Solo 401(k) plans have become popular among self-employed professionals, freelancers, consultants, and small business owners looking to maximize retirement contributions, reduce taxes, and maintain control over investment decisions—all within a cost-effective and administratively efficient structure.
Eligibility Requirements
When choosing the right retirement plan for yourself or your small business, understanding the eligibility rules is key. The Solo 401(k) is best suited for self-employed individuals or small business owners with no full-time employees other than a spouse. It requires earned income from the business, and if you hire a full-time employee (1,000+ hours/year), you may need to convert to a different type of plan.
A SEP IRA is designed for self-employed individuals and businesses of any size, but if you contribute for yourself, you must also contribute for all eligible employees. Employees must be at least 21 years old, have worked for you in 3 of the past 5 years, and have earned at least $750 in compensation in the current year. SEP contributions are employer-funded only.
A SIMPLE IRA is available to businesses with 100 or fewer employees and no other retirement plan. Employees are eligible if they have earned $5,000 in any two prior years and are expected to earn at least $5,000 in the current year. Employers are required to make either matching or non-elective contributions annually.
Retirement Plan Eligibility Comparison
| Feature | Solo 401(k) | SEP IRA | SIMPLE IRA |
|---|---|---|---|
| Who Can Set It Up | Self-employed with no full-time employees (other than a spouse) | Any business owner, including sole props and corporations | Employers with 100 or fewer employees, no other retirement plan |
| Employee Eligibility | Must have earned income from the business | Age 21+, worked 3 of the last 5 years, earned $750+ | Earned $5,000 in 2 previous years, expected $5,000 in current year |
| Full-Time Employees | Not allowed (unless it’s your spouse) | Must include eligible employees if contributions are made for owner | Must offer to all eligible employees |
| Who Contributes | Employee + employer | Employer only | Employee + employer (required match or non-elective) |
| Business Types | Sole props, LLCs, S-corps, C-corps | Sole props, partnerships, LLCs, corporations | Any small business that meets the 100-employee limit |
Solo 401(k) vs. SIMPLE IRA
There are a number of options that are specific to Solo 401(k) plans that make it a far more attractive retirement option for a self-employed individual than a SIMPLE IRA. A breakdown:
1. Higher Contributions
A Solo 401(k) offers both employee deferral and employer profit-sharing contributions, making it a more robust retirement savings option compared to a SIMPLE IRA, which provides more limited employee deferral opportunities.
Solo 401(k) Contribution Limits for 2026:
- Under Age 50: Participants can contribute up to $24,500 as an employee deferral (pretax or Roth). Additionally, the business can contribute up to 25% of compensation (or 20% for sole proprietors or single-member LLCs) as a profit-sharing contribution, for a combined maximum of $72,000.
- Age 50 and Over: Participants can contribute up to $32,500, which includes the standard deferral plus a $8,000 catch-up. Combined with profit-sharing, the maximum contribution is $80,000.
- Ages 60 to 63: An enhanced catch-up of $11,250 applies, increasing the total contribution limit to $83,250.
SIMPLE IRA Contribution Limits for 2026:
- The employee deferral limit is $17,000, plus a $4,000 catch-up for those age 50 and older.
- Individuals between ages 60 and 63 may contribute an increased catch-up amount of $5,250.
- Employers must either:
- Match employee contributions dollar-for-dollar up to 3% of compensation, or
- Contribute 2% of compensation for all eligible employees who earn at least $5,000 during the year.
While both plans offer tax-advantaged retirement savings, the Solo 401(k) allows for significantly higher contribution limits—especially beneficial for high-earning self-employed individuals—compared to the more limited structure of a SIMPLE IRA.
2. After-Tax Roth Accounts
The Roth feature has been a popular option for years for Solo 401(k) plan participants. A couple of years ago, there was no Roth option for SIMPLEs. However, thanks to SECURE 2.0, that's no longer the case.
If the plan permits, a Solo 401(k) investor can make after-tax Roth contributions to the plan, and enjoy tax-free qualified withdrawals during retirement. So long as you are at least age 59 ½, and the Roth has been open for at least five years, all distributions will be without tax. And this is true for IRAs and 401(k) plans.
One could always convert a SIMPLE IRA to Roth. However, a two-year "hold rule" applied for conversions, imposing a 25% penalty for early conversions. Now, if their plan offers it, participants can direct both their own contributions and employer contributions directly into a new SIMPLE Roth account, bypassing this waiting period entirely.
3. Tax-Free Loan Option
With a 401(k) plan, a plan participant can borrow up to $50,000 or 50% of your account value, whichever is less. The loan can be used for any purpose but must be paid back over a five-year period using a minimum interest rate of Prime. Pay yourself back, with interest, instead of a bank or other lender.
With SIMPLE IRA, the IRA holder is not permitted to borrow even one dollar from the SIMPLE IRA without triggering a prohibited transaction.
4. Use Non-Recourse Leverage and Pay No Tax
With a Solo 401(k) plan, a plan participant can make a real estate investment using a non-recourse loan (a loan not personally guaranteed by the plan participant) without triggering the Unrelated Debt Financed Income (UDFI) rules and the Unrelated Business Taxable Income (UBTI) tax (IRC 514). The highest UBTI tax rate is a staggering 37%.
The exception is only applicable to 401(k) qualified retirement plans and does not apply to IRAs. In other words, using a SIMPLE IRA to make a real estate investment involving non-recourse financing would trigger the UBTI tax if there was greater than $1,000 of net income associated with the loan.
5. Open the Account at Any Local Bank
A Solo 401(k) offers significant flexibility, allowing its bank account to be opened at any standard local bank or trust company. In fact, IRA Financial can open an account for you at Capital One if you so choose.
An IRA which strictly requires a specialized custodian to hold its funds. While a Solo 401(k) provides this freedom in banking, financial institutions remain crucial for establishing the plan's legal framework, offering guidance on contributions and distributions, and often providing platforms for investment, even if they don't directly custody the initial bank account.
6. No Need for the Cost of an LLC
The 401(k) plan itself can make investments without the need for an LLC, which, depending on the state of formation, could prove costly. Since a 401(k) plan is a trust, the trustee (on behalf of the trust) can take title to a real estate asset without the need for an LLC.
While an LLC is not required, many self-employed individuals choose to form an LLC for reasons like:
- Liability protection: An LLC separates your personal assets from your business liabilities.
- Tax flexibility: An LLC can elect to be taxed as a sole proprietorship, partnership, S-corporation, or C-corporation, offering different tax advantages depending on your situation.
7. Better Creditor Protection
In general, a Solo 401(k) plan offers greater creditor protection than a SIMPLE IRA. The 2005 Bankruptcy Act generally protects all 401(k) plan assets from creditor attack in a bankruptcy proceeding. In addition, most states offer greater creditor protection to a Solo 401(k) qualified retirement plan than a SIMPLE IRA outside of bankruptcy. Solo 401(k) plans follow the same rules as traditional 401(k) plans in terms of asset and creditor protection.
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
Investment Options
Both Solo 401(k)s and SIMPLE IRAs offer distinct investment landscapes. A Solo 401(k) provides extensive flexibility, often allowing for a "self-directed" approach. This means you can invest in a broad spectrum of assets beyond traditional stocks, bonds, mutual funds, and ETFs, including alternative investments like real estate, private equity, precious metals, and even cryptocurrencies. The specific options depend on your chosen custodian, with some specializing in allowing these less conventional assets, provided they comply with IRS regulations regarding prohibited transactions. IRA Financial does not place limits on the types of investments you can make!
In contrast, a SIMPLE IRA generally offers a more streamlined and limited selection of investment options. These plans are typically managed by traditional financial institutions that provide a curated menu of mutual funds, ETFs, individual stocks, and bonds. While suitable for those seeking simplicity and a standard diversified portfolio, SIMPLE IRAs typically do not accommodate direct investments in alternative assets like real estate or private businesses. Your investment choices within a SIMPLE IRA will be largely dictated by the specific offerings of the financial provider.
Of course, with the right custodian, you can choose a Self-Directed SIMPLE IRA. IRA Financial does offer this option, as do other providers. Carefully consider your options when deciding. Make sure to check out fees, investment options, and other services.
Administrative Responsibilities and Burden
Notwithstanding the above on the Solo 401(k), the SIMPLE IRA does have a number of attractive advantages for small businesses:
- Available to any small business – generally with 100 or fewer employees
- Easily established by adopting a SIMPLE IRA prototype or an individually designed plan document. In fact, you can establish a Self-Directed SIMPLE IRA quickly and easily with the IRA Financial app.
- No filing requirement for the employer since the IRA custodian would be required to file IRS Form 5498. In the case of a Solo 401(K) plan, if assets are above $250,000 as of December 31 of the previous year, IRS Form 5500-EZ must be filed.
- In addition, one quirky rule with a SIMPLE IRA, is that an employer that adopts a SIMPLE IRA cannot have any other retirement plan at the same time, so keep that in mind.
- SIMPLE IRA assets cannot be rolled into another IRA or 401(k) plan until the SIMPLE IRA has been opened at least two years.
Conclusion
Choosing between a Solo 401(k) and a SIMPLE IRA ultimately hinges on your specific needs as a self-employed individual or small business owner. If maximizing your annual contributions and having extensive control over diverse investments, including alternative assets, are your top priorities, the Solo 401(k) is likely the superior choice, despite its slightly greater administrative requirements.
However, if simplicity, ease of setup, and lower administrative burdens are paramount, particularly when looking to offer a straightforward retirement benefit to a small team of employees, the SIMPLE IRA stands out as an excellent, cost-effective solution. Evaluate your contribution goals, desired investment flexibility, and willingness to manage administrative tasks to determine which plan will best serve your long-term financial security.
Maximize Your Retirement Savings with the Right Plan:
Choosing between a Solo 401(k) and a SIMPLE IRA depends on your business structure and retirement goals. A Solo 401(k) offers higher contribution limits, Roth options, and more investment flexibility, while a SIMPLE IRA is easier to set up with lower administrative costs. Understanding these differences can help you select the plan that best aligns with your financial objectives.
Schedule a Free Consultation – Discuss your retirement planning needs with an expert.
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Maintaining Employer & Employee Deferral Contributions in Your 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, in order 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 other than a spouse or other owner(s).
One of the primary advantages of establishing a Solo 401(k) for a small business is the ability to generate high annual tax deductions and shelter related income and gains from taxation. The primary medium for generating deductions is through making employee- and employer-based plan contributions. In the case of an employer 401(k) plan that consists of not just owner-employees (i.e. Tesla), the maximum one would typically be able to contribute in 2026 is $24,500 or $32,500 if at least age 50.
Many employer's 401(k) plans tend to elect to be treated as a safe harbor 401(k) plan, which requires the employer to make a 3%-5% matching safe harbor contribution. Whereas in the case of a Solo 401(k) plan, the maximum one can contribute in 2026 is $72,000 or $80,000 if age 50 or older.
The primary reason a Solo 401(k) plan participant can contribute more than an employee at a business they do not own (i.e. safe harbor 401(k)), a participant can make employee deferral contribution plus up to a 25% employer profit sharing contribution (20% if self-employed), versus 3%-5% safe harbor 401(k) matching contributions.
Note – a safe harbor 401(k) plan can technically make employer contributions as well, but it is very uncommon since that would require the employer to make the employer profit sharing contributions (up to 25% of the employee’s salary) for every eligible participant.
Below is a detailed breakdown of how the employee and employer contribution rules work for a Solo 401(k) plan participant and employer.
Employee Elective Deferrals
For 2026, up to $24,500 per year can be contributed by the participant through employee elective deferrals. An additional $8,000 can be contributed for persons at least age 50. These contributions can be up to 100% of the participant’s self-employment compensation. Employee deferral contributions can be made in pretax or Roth. If you're over the age of 50 and made more than $150,000 in 2025, you're contributions will need to be in Roth, due to the new Secure Act 2.0 rule.
In order to determine how much one can contribute to a Solo 401(k) plan as an employee deferral in 2024, the following items must be considered:
- One cannot contribute more than they earn. For example, if one earns $10,000 in earned income from the adopting employer business, only up to $10,000 can be contributed to the plan, minus any FICA and social security taxes.
- Only earned income or W-2 from the adopting employer or a related business can be used to determine the aggregate earned income amount.
- If one makes any employee deferral contributions to another 401(k) plan, that amount needs to be taken into account to reduce the maximum employee deferral contribution amount.
- For example, Joe is 35 and works full-time at a software company he does not own. Joe made a $10,000 employee deferral contribution to the plan. Joe also has a side business where he does consulting work and earned $40,000. If Joe set up a Solo 401(k) plan for the consulting business, he would be able to make another $14,500 employee deferral contribution to the plan ($24,500 maximum, minus $10,000 employee deferral contribution he already made.)
- Employee deferral contributions can be made in pretax or Roth.
Employer Profit Sharing Contributions
Through the role of employer, an additional contribution can be made to the plan in an amount up to 25% of the participant’s W-2 income or 20% in the case of a sole proprietor or single member LLC. As a result of the SECURE Act 2.0, employer profit sharing contributions can now be made in pretax or Roth. If Roth employer profit sharing contributions are made, the employee must recognize income on the amount of the employer contribution and the employer would receive a corresponding income tax deduction.
Example 1: Jane has a sole proprietorship business and earned $100,000 of net schedule C income in 2024. Jane would be able to make up to a $20,000 employer profit sharing contribution to her plan (20% of $100,000 Schedule C income).
Example 2: Amy is the sole owner of a S corporation and earned $100,000 in W-2 income for the year. The business generated $2 million in profit. Amy would be able to make up to a $25,000 employer profit sharing contribution to her plan (25% of $100,000 W-2). Note – in the case of a corporation, employee and employer profit sharing contributions are based on the W-2 amount and not the profits of the business.
Total Limit
The sum of both contributions can be a maximum of $72,000 for 2026 or $80,000 for persons age 50 and older. If the business owner’s spouse elects to participate in the Solo 401(k) and earns compensation from the business, the spouse is allowed to make separate and equal contributions doubling the couples’ annual total contribution to $144,000 for or $160,000 if both spouses are at least age 50.
| Employee Deferral Max | Employer Profit Sharing Max | Total Solo 401(k) Max Contributions for 2026 | |
|---|---|---|---|
| Sole Proprietor Under 50 | $24,500 of Net Schedule C Income | 20% of Net Schedule C income | $72,000 |
| Sole Proprietor Age 50+ | $32,500 of Net Schedule C Income | 20% of Net Schedule C income | $80,000 |
| C Corp Owner Under 50 | $24,500 of W-2 Income | 25% of W-2 | $72,000 |
| C Corp Owner Age 50+ | $32,500 of W-2 Income | 25% of W-2 | $80,000 |
| S Corp Owner Under 50 | $24,500 of W-2 Income | 25% of W-2 | $72,000 |
| S Corp Owner Age 50+ | $32,500 of W-2 Income | 25% of W-2 | $80,000 |
| Partner of a 1065 Partnership Under 50 | $24,500 of Guaranteed Payment Amount | 25% of Guaranteed Payment Amount | $72,000 |
| Partner of a 1065 Partnership Age 50+ | $32,500 of Guaranteed Payment Amount | 25% of Guaranteed Payment Amount | $80,000 |
Why Should I Choose IRA Financial to Set up My Solo 401(k)?
IRA Financial “literally” wrote the book on the Self-Directed Solo 401(k). Our founder, Adam Bergman, Esq, has written nine books on self-directed retirement plans and, over the last 15+ years, has helped over 27,000 self-directed clients invest over $5 billion in alternative assets. IRA Financial is the leading provider of Self-Directed Solo 401(k) plans with “checkbook control." Our expertise and experience in designing and customizing Solo 401(k) plan solutions for entrepreneurs and small businesses is unmatched.
Our solution is specifically designed and customized for each type of investment. Whether it is real estate, private equity, venture capital, hedge funds, private businesses, cryptos, precious metals, hard money loans, etc., our Solo 401(k) tax experts will work with you to design the perfect solution for your business and investment goals, including tax optimization, Roth maximization, and UBTI protection. Additionally, IRA Financial is the only self-directed retirement company that provides annual consulting, IRS tax reporting/filings, BOI FinCEN reporting, and full IRS audit guarantee.
Stay compliant and optimize contributions in your Solo 401(k)
Managing both employer and employee deferrals in your Solo 401(k) means understanding the rules, keeping proper documentation, and maximizing your tax-advantaged savings. Our specialists at IRA Financial can help you structure contributions correctly, stay IRS-compliant, and get the most out of your plan.
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How to Set Up a Self-Directed IRA with Checkbook Control in 4 Steps
For many investors, traditional IRAs can feel restrictive. Stocks, bonds, and mutual funds may play an important role in long-term planning, but they leave out an entire universe of alternative investments like real estate, private businesses, precious metals, notes, cryptocurrency, and more. That is where the Self-Directed IRA comes in.
A Self-Directed IRA allows you to take control of your retirement investing by dramatically expanding what you can invest in. When paired with checkbook control through a special purpose LLC, it becomes one of the most flexible and tax-advantaged retirement structures available today.
Below, we explain what a Self-Directed IRA is, why investors use it, how checkbook control works, and the simple four-step process to open your own Checkbook Control IRA with a leading custodian like IRA Financial.
1. What Is a Self-Directed IRA?
A Self-Directed IRA is an individual retirement account that allows you to invest in a far broader range of assets than a traditional or Roth IRA held at a bank or brokerage firm. While all IRAs follow the same tax rules under the Internal Revenue Code, Self-Directed IRAs differ in one crucial way.
You, not the custodian, decide what to invest in.
A Self-Directed IRA can hold:
- Real estate, including residential, commercial, and raw land
- Private equity, startups, and LLC interests
- Precious metals that meet IRS requirements
- Promissory notes and private lending
- Cryptocurrency
- Tax liens and tax deeds
- Farmland and mineral rights
The IRS does not publish a list of approved investments. Instead, it defines a short list of prohibited assets, making the Self-Directed IRA one of the most flexible retirement vehicles available.
2. Advantages of a Self-Directed IRA
Self-Directed IRAs offer two major advantages: powerful tax benefits and expanded investment flexibility.
Tax Advantages
The tax treatment mirrors that of traditional and Roth IRAs.
- Traditional Self-Directed IRA: Contributions may be tax-deductible, and earnings grow tax-deferred until withdrawal.
- Roth Self-Directed IRA: Contributions are made with after-tax dollars, and earnings grow tax-free. Qualified withdrawals are tax-free if you are over age 59½ and the Roth IRA has been open for at least five years.
When alternative assets generate income such as rent, interest, or capital gains, those profits flow back into the IRA tax-deferred or tax-free, depending on the account type.
Investment Advantages
A Self-Directed IRA offers:
- Diversification: Reduced reliance on stock market volatility
- Higher return potential: Access to private deals and real estate opportunities
- Control: Full authority over investment choices and strategy
For investors who want to take an active role in their retirement planning, a Self-Directed IRA provides unmatched flexibility.
3. Types of Self-Directed Accounts and the Power of Checkbook Control
There are several types of Self-Directed retirement accounts, including:
- Self-Directed Traditional IRA
- Self-Directed Roth IRA
- Self-Directed SEP IRA
- Self-Directed SIMPLE IRA
- Self-Directed Solo 401(k) for self-employed individuals
Among these, the most flexible structure is the Self-Directed IRA with checkbook control.
What Is Checkbook Control?
Checkbook control allows you to make investments directly, without waiting for custodian approval on every transaction. This is accomplished by forming a special purpose LLC that is owned by your IRA. You serve as the manager of the LLC.
This structure provides several key benefits.
- Limited Liability Protection: The LLC creates legal separation between your retirement assets and other activities, protecting assets held inside the LLC from liabilities unrelated to the investment.
- Greater Control: As manager of the LLC, you can write checks, send wires, and execute transactions immediately without custodian delays.
- Greater Privacy: Investments are made in the name of the LLC rather than the IRA custodian, adding an extra layer of privacy.
- Administrative Simplicity: Eliminates repeated authorization forms, transaction fees, and long processing times by allowing investments via checks or wires from the LLC account.
- Tax Efficiency: The IRA-owned LLC is a pass-through entity that does not pay federal income tax, with profits flowing back into the IRA tax-deferred or tax-free.
Single-Member vs. Multi-Member LLCs
Most investors use a single-member LLC, which is treated as a disregarded entity for tax purposes. This means the IRS ignores the LLC and treats all income as belonging directly to the IRA, resulting in no additional tax filings.
Multi-member LLCs are treated as partnerships and generally require Form 1065. These structures are useful when multiple IRAs or family members invest together but involve additional complexity and reporting.
For simplicity, speed, and cost efficiency, most investors choose a single-member LLC unless partnership investing is required.
4. How Easy It Is to Set Up a Self-Directed IRA with IRA Financial
Setting up a Self-Directed IRA used to be complicated. Today, with IRA Financial, the process is fast, streamlined, and user-friendly.
IRA Financial was founded by Adam Bergman, widely recognized as the pioneer of the checkbook control IRA structure. He literally wrote the book on Checkbook IRAs and has helped tens of thousands of investors access alternative investments inside retirement accounts.
Opening a Checkbook Control IRA with IRA Financial follows a simple four-step process.
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
The 4 Steps to Open a Checkbook Control IRA
Step 1: Choose Your Alternative Investment
Before opening the account, decide what type of investment you want to make. With a Self-Directed IRA, you can invest in almost anything except:
- Life insurance
- Collectibles such as art, cars, wine, rugs, or stamps
- Prohibited transactions that personally benefit you or certain family members
If an investment is not prohibited by the IRS, it can likely be held inside your IRA.
Step 2: Open Your Account Online or Through the IRA Financial App
IRA Financial makes opening an account simple.
- You can apply from your phone or computer
- The onboarding process takes about three minutes
- The IRA Financial team handles documentation and compliance
Step 3: Fund Your IRA and IRA-Owned LLC
There are three primary ways to fund a Self-Directed IRA: contributions, transfers, and rollovers.
Contributions
A contribution involves adding new money to your IRA.
- Under age 50: $7,000
- Age 50 and older: $8,000
2026 IRA contribution limits:
- Under age 50: $7,500
- Age 50 and older: $8,600
Traditional IRA contributions may be tax-deductible depending on income and employer plan participation. Roth IRA contributions are subject to income limits.
Transfers
A transfer moves funds from one IRA custodian to another.
- Direct transfers move funds custodian to custodian and are the safest option
- No taxes or penalties
- Unlimited per year
Indirect transfers involve receiving the funds personally and redepositing them within 60 days. These are limited to once per year and carry significant risk if not handled properly.
Rollovers
Rollovers move funds from former employer plans such as:
- 401(k)
- 403(b)
- 457(b)
- Thrift Savings Plan
- Pension plans
Direct rollovers are recommended. Indirect rollovers must be redeposited within 60 days and may trigger withholding if mishandled. IRA Financial coordinates the entire funding process and sets up your special purpose LLC.
Step 4: Invest Using Checkbook Control
Once the IRA owns the LLC and the LLC bank account is funded, you are ready to invest.
You can:
- Write a check
- Send a wire
- Use an LLC debit card if applicable
Investments are executed immediately and titled in the name of the LLC, preserving all IRA protections.
Conclusion: Why Checkbook Control and IRA Financial Matter
A Self-Directed IRA with checkbook control offers:
- Maximum investment flexibility
- Greater privacy and liability protection
- Faster execution with no custodian delays
- Full checkbook authority
- Tax-advantaged growth
- Low, predictable fees
With IRA Financial, the setup process is faster and simpler than ever.
Founded by Adam Bergman, the pioneer of the checkbook control structure, IRA Financial has helped thousands of investors open compliant Self-Directed IRAs and take full control of their retirement investing.
If you are ready to invest beyond Wall Street and unlock the power of alternative assets, a Self-Directed IRA with checkbook control is one of the most powerful tools available, and IRA Financial makes it easy to get started.
Why the Self-Directed IRA UBIT Regime Exists and How It Serves Wall Street
For decades, large brokerage firms and banks have dominated the retirement industry. They built a system where the vast majority of retirement savings flows into publicly traded securities like mutual funds, ETFs, and corporate bonds. The Unrelated Business Income Tax (UBIT) rules, first created nearly a century ago, now function as a quiet but powerful advantage for Wall Street’s control over retirement dollars.
UBIT was not designed to punish self-directed investors. Yet in practice, it discourages them from doing what the IRS otherwise allows: investing in real assets, private businesses, and leveraged real estate inside their IRAs. To understand why this happens, it helps to look at how UBIT originated and why it no longer fits today’s retirement landscape.
The Origins of UBIT: A Rule from a Different Era
UBIT was created in 1950 under Sections 511 through 514 of the Internal Revenue Code, long before IRAs even existed. At the time, Congress was concerned that tax-exempt organizations such as universities, churches, and charities were competing unfairly with private businesses. These organizations were operating profit-generating ventures while paying no tax.
To address this issue, lawmakers decided that if a tax-exempt organization engaged in a business activity unrelated to its charitable purpose, the income from that activity should be taxed. The idea was straightforward. A university should not be able to operate a chain of car washes and pay no tax simply because it is tax-exempt.
When Individual Retirement Accounts were introduced in 1974 under ERISA, Congress applied these same exempt-organization tax rules to IRAs without fully considering how different an IRA actually is. Unlike charities, IRAs have no public or charitable mission. They are personal retirement savings vehicles owned by individuals.
Why UBIT Was Misapplied to IRAs
The logic behind UBIT does not align with how IRAs work. Charities are tax-exempt because they serve a public purpose. IRAs are tax-deferred because individuals are saving for retirement. There is no public subsidy to protect and no unfair competition to correct.
Still, because IRAs do not pay tax until funds are withdrawn, the Treasury applied UBIT to IRAs that invest in active trades or businesses through pass-through entities, or that use leverage to acquire assets. As a result, when an IRA investor buys rental real estate with a non-recourse mortgage or invests in a private operating business, a portion of the income may be subject to UBIT. These taxes are often imposed at trust tax rates that can exceed 35 percent.
In practice, UBIT penalizes investors who choose to diversify beyond Wall Street products.
How UBIT Protects the Brokerage Monopoly
From a policy perspective, UBIT creates a built-in bias toward publicly traded investments. These are the same products sold and managed by large financial institutions.
Consider the contrast. A mutual fund can use leverage, operate an active business model, and distribute income to IRA holders without triggering UBIT because it is structured as a corporation. But if that same IRA investor purchases a private REIT, finances a multifamily property, or invests in a local operating business, the identical income or leverage can suddenly be classified as unrelated business taxable income.
This inconsistency funnels trillions of retirement dollars back into public markets while discouraging investment in private markets, entrepreneurship, and real assets. The result is predictable.
- Public companies benefit from a steady, tax-advantaged stream of retirement capital.
- Private businesses face higher effective taxes even when owned inside tax-deferred retirement accounts.
UBIT has effectively become a regulatory barrier that protects the existing financial system under the guise of fairness.
The Real Estate Paradox
Real estate provides one of the clearest examples of this imbalance.
A Self-Directed IRA investor can purchase a rental property outright and defer taxes on the income until retirement distributions begin. However, if that same investor uses a non-recourse mortgage to finance part of the purchase, the portion of income attributable to the debt becomes taxable under IRC Section 514, known as Unrelated Debt-Financed Income.
Meanwhile, publicly traded REITs use leverage constantly and face no UBIT at all. The only real difference is structure and scale. Large institutions can compound gains tax-deferred through complex fund vehicles, while individual investors are penalized for applying the same leverage transparently within their own retirement accounts.
Why UBIT No Longer Makes Policy Sense
UBIT assumes a clear distinction between tax-exempt entities and taxable ones. That distinction does not apply to retirement accounts. IRAs are not permanently tax-exempt. They are tax-deferred. Every dollar withdrawn is eventually taxed.
Because of that reality:
- The government ultimately collects tax on all IRA income at distribution.
- There is no competitive imbalance since the tax is deferred, not eliminated.
- UBIT simply accelerates taxation on certain private investments and discourages diversification.
In effect, UBIT functions as a form of double taxation on self-directed investors while favoring public markets and institutional custodians.
Book a free call with a self-directed retirement specialist
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The Economic Consequences
By discouraging leverage and direct ownership, UBIT keeps trillions of retirement dollars locked into publicly traded assets. This limits capital flowing into small businesses, local real estate, and entrepreneurial ventures that drive economic growth.
Passive investment in public securities is rewarded, while active wealth creation through private ownership is penalized.
The beneficiaries are clear:
- Large banks and brokerage firms whose products dominate retirement accounts.
- Public corporations that benefit from a constant inflow of retirement capital.
The cost is borne by everyday investors who want to build wealth through real estate, private equity, or small business ownership.
Toward a Fairer Future for Retirement Investors
Reforming UBIT for IRAs would not eliminate taxation. It would make it more rational. Congress could exempt IRAs from UBIT while preserving the rules for true tax-exempt organizations. That change would encourage diversification, support entrepreneurship, and create a more balanced retirement system.
Until reform happens, self-directed investors must navigate UBIT carefully and work with custodians who understand its complexities.
Why IRA Financial Leads This Movement
At IRA Financial, we have long maintained that the current UBIT framework is outdated and misaligned with modern retirement investing. With more than 27,000 clients and over $4.4 billion in assets under administration, we help investors understand UBIT exposure, implement compliant strategies, and take control of their retirement futures.
The Self-Directed IRA movement is not just about flexibility. It is about fairness.
Until policy catches up with reality, IRA Financial will continue advocating for a retirement system that works for investors, not institutions.
Solo 401(k) vs. Keogh: Which Retirement Plan Is Best for the Self-Employed?
When it comes to retirement savings for self-employed individuals and small business owners, choosing the right plan can significantly impact long-term financial security. Two of the most common options are the Solo 401(k) and the Keogh plan. Both offer valuable tax advantages and high contribution limits, but they differ in flexibility, complexity, and eligibility.
This article compares the Solo 401(k) and Keogh plan in detail, covering their key features, benefits, drawbacks, and which type of self-employed professional each plan best suits.
Key Takeaways
- The Solo 401(k) often offers lower administrative costs, Roth options, and broader investment flexibility, including real estate and alternative assets.
- Solo 401(k)s are more flexible and typically a better fit for self-employed individuals with no employees.
- Keogh plans are ideal for those with employees or who want a defined benefit (pension-style) structure.
What Is a Solo 401(k)?
A Solo 401(k) (also known as an Individual 401(k) or One-Participant 401(k) plan) is designed for self-employed individuals or business owners without employees (other than a spouse or other business owner). It functions similarly to a standard 401(k) but allows the account holder to contribute as both employee and employer.
Key Features:
- Eligibility: Available to anyone with self-employment income and no ineligible employees.
- Contribution Limits (2026):
- Employee: Up to $24,500 ($32,500 if age 50+).
- Employer: Up to 25% of compensation, with a combined maximum of $72,000 ($80,000 if age 50+).
- Tax Advantages:
- Pretax or Roth contributions.
- Tax-deferred investment growth.
- Investment Flexibility: Wide range of options, including real estate, private businesses, and cryptocurrencies.
- Administrative Requirements: Minimal paperwork; Form 5500 required only if assets exceed $250,000.
What Is a Keogh Plan?
A Keogh plan (or HR-10 plan) is a tax-deferred retirement plan for self-employed individuals and small businesses, including partnerships. While once popular, it has declined in use due to the rise of simpler plans like the Solo 401(k) and SEP IRA.
Key Features:
- Eligibility: Available to self-employed individuals and partnerships; can include employees.
- Types of Keogh Plans:
- Defined Contribution: Similar to profit-sharing or money-purchase plans.
- Defined Benefit: Operates like a traditional pension with fixed annual contributions.
- Contribution Limits (2026):
- Defined Contribution: Up to 25% of compensation (max $72,000).
- Defined Benefit: Contributions based on actuarial calculations—often much higher.
- Tax Advantages:
- Tax-deductible contributions.
- Tax-deferred growth.
- Administrative Requirements:
- Formal plan document required.
- Annual IRS reporting via Form 5500.
- Typically higher administrative costs.
Solo 401(k) vs. Keogh Plan: A Detailed Comparison
| Feature | Solo 401(k) | Keogh Plan |
|---|---|---|
| Eligibility | Self-employed individuals with no employees (except spouse) | Self-employed individuals or partnerships; can include employees |
| Contribution Limits (2026) | Up to $72,000 ($80,000 if 50+) | Up to $72,000 for defined contribution; higher for defined benefit |
| Employee Contributions | Yes – up to $24,500 ($32,500 if 50+) | Not applicable |
| Tax Benefits | Pretax or Roth options, tax-deferred growth | Tax-deductible, tax-deferred growth |
| Investment Options | Broad, including alternative assets | Broad, but may have restrictions |
| Administrative Burden | Low | Moderate to high |
| Best For | Solo entrepreneurs and freelancers | Businesses with employees or pension-seekers |
Pros and Cons
Solo 401(k) Pros:
✔ High contribution limits with both employee and employer contributions.
✔ More investment flexibility, including real estate and alternative assets.
✔ Roth contribution option for tax-free withdrawals in retirement.
✔ Lower administrative burden than Keogh plans.
Solo 401(k) Cons:
✖ Only available for businesses with no employees (except a spouse or business partner).
✖ Must file IRS Form 5500 once assets exceed $250,000.
Keogh Plan Pros:
✔ Higher potential contributions with a defined benefit structure.
✔ Suitable for businesses with employees.
✔ Allows for a structured pension-like plan with predictable retirement benefits.
Keogh Plan Cons:
✖ Higher administrative complexity and costs.
✖ Requires annual IRS filings and actuarial calculations (for defined benefit plans).
✖ Less flexibility than Solo 401(k) for self-employed individuals without employees.
Which Plan Should You Choose?
Choose a Solo 401(k) if you’re a freelancer, independent contractor, or small business owner without employees who wants maximum contribution flexibility and minimal paperwork.
Choose a Keogh plan if you have employees or want to establish a defined benefit plan for predictable retirement income and higher contribution potential.
Final Thoughts
For most self-employed professionals, the Solo 401(k) remains the more efficient and flexible choice. It combines high contribution limits, tax advantages, and broad investment options with lower administrative costs. However, for business owners with employees or those seeking a structured pension, a Keogh plan can still be a powerful tool.
Before deciding, consult with a retirement expert or tax advisor to ensure your plan aligns with your income, business goals, and long-term retirement strategy.
Which retirement plan fits your business?
Deciding between a Solo 401(k) and a Keogh plan can be confusing — each has different rules, tax implications, and contribution limits. Get expert help to assess which option meets your retirement goals and business structure most efficiently.
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Frequently Asked Questions
Can I have both a Solo 401(k) and a Keogh plan?
Why are Keogh plans less popular today?
Can I invest in real estate with a Keogh plan?
How to Invest in Real Estate with a Self-Directed Solo 401(k)
For entrepreneurs, consultants, and small business owners, the Self-Directed Solo 401(k) has become one of the most powerful wealth-building tools available. Unlike traditional retirement accounts that limit investments to stocks and mutual funds, a properly structured Solo 401(k) allows you to invest directly in real estate while preserving the full tax advantages of a retirement plan. When executed correctly, it combines high contribution limits with investment control, enabling business owners to grow assets faster and more strategically than most people realize.
The Solo 401(k) is built specifically for self-employed individuals. It provides the same retirement benefits that large corporations offer executives, without the bureaucracy and restrictions that often limit flexibility.
What Is a Solo 401(k)?
A Solo 401(k), also called an Individual 401(k), is a retirement plan for self-employed individuals or businesses with no full-time employees other than a spouse. Eligibility is straightforward: if you own or operate a business, generate earned income, and do not employ W-2 workers outside your household, you likely qualify.
Unlike an IRA, where contributions are made only as an individual, a Solo 401(k) allows you to act as both employee and employer. This distinction is powerful because it lets you make employee salary deferrals while also contributing as the business owner, resulting in significantly higher contribution limits than any IRA could offer.
Not All Solo 401(k) Plans Are the Same
Many entrepreneurs assume that opening a Solo 401(k) at a large brokerage firm gives full investment flexibility. Unfortunately, that is rarely the case.
Brokerage firms operate product-driven platforms. They earn revenue by selling investments, managing assets, and collecting fees tied to account balances. As a result, their Solo 401(k) plans are often limited to publicly traded securities and managed portfolios. While these may work for some investors, they do not allow direct ownership of real estate or other alternative investments.
Companies like IRA Financial operate differently. They focus on creating plan structures, managing compliance, and providing administrative and legal expertise. This open-architecture design gives clients full control over where and how their money is invested. With the right plan documents, investors can hold real estate, cryptocurrencies, private companies, precious metals, and other IRS-approved alternative assets.
The Power of Contribution Limits
One of the defining features of the Solo 401(k) is how much you can contribute.
As an employee, you may defer salary into the plan each year.
- 2025: $23,500 under age 50, $31,000 if over 50, $34,750 for ages 60–63
- 2026: $24,500 under age 50, $32,500 if over 50, $35,750 for ages 60–63
The business can also contribute up to approximately 25 percent of compensation, or roughly 20 percent of self-employment income.
Combined, total annual contributions reach remarkable levels:
- 2025: $70,000 under 50, $77,500 for over 50, $81,250 for ages 60–63
- 2026: $72,000 under 50, $80,000 for over 50, $83,250 for ages 60–63
For real estate investors, this means faster deal flow, larger capital reserves, and the ability to scale portfolios more rapidly than with an IRA.
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
Borrowing From Your Own Plan
The Solo 401(k) allows participants to borrow against their account balance.
- Borrow up to 50 percent of your balance, capped at $50,000
- No taxes or penalties if repayments follow IRS rules
- Interest goes back into your account
- No credit check or lender approval required
This feature provides liquidity for high-opportunity moments while maintaining tax-deferred growth.
The Mega Backdoor Roth Strategy
A properly structured Solo 401(k) allows contributions beyond Roth IRA limits and conversion to Roth.
- 2025: $70,000 total contributions can convert to Roth
- 2026: $72,000 total contributions
High-growth real estate investments benefit enormously from Roth treatment. All future income and appreciation can become completely tax-free.
Simplicity in Administration
Despite its power, the Solo 401(k) is simple to manage.
There is no Form 5500 filing obligation until plan assets exceed $250,000. There are no nondiscrimination tests, no required third-party administrators, and no mandated annual valuations.
This makes the plan highly efficient for solo operators.
Checkbook Control and Real Estate Execution
In a Self-Directed Solo 401(k), you are the trustee of the plan. You open the bank account, control transactions, sign contracts, and receive income directly.
There is no custodian approval required for each transaction. No paperwork delays. No middlemen.
For real estate, this level of control is critical. Competitive markets reward speed, and checkbook control allows investors to act without hesitation.
Why Real Estate Works Well Inside a Solo 401(k)
When held in a retirement account, real estate income is sheltered, and appreciation compounds.
- Rental income reinvests tax-deferred or tax-free
- Capital gains are eliminated
- Inflation protection is built in
- Diversification reduces exposure to Wall Street volatility
This makes the strategy financially productive and structurally resilient.
Using Leverage Without UBIT
Unlike IRAs, Solo 401(k) plans are exempt from UBIT when using non-recourse leverage under IRC Section 514(c)(9).
This allows investors to finance real estate while avoiding taxes that could reach 37% under IRA rules. This is a major advantage over Self-Directed IRAs.
Prohibited Transactions and IRS Rules
The IRS prohibits:
- Self-dealing or personal use of the property
- Transactions with disqualified persons (family members, related entities)
- Personally guaranteeing loans
Violations can disqualify the plan, so professional guidance is critical.
Investors can perform activities such as:
- Finding and analyzing deals
- Hiring third-party contractors for improvements
- Approving and documenting expenses
- Monitoring work completion
The Cherwenka case provides guidance for permissible actions when using a retirement account for real estate.
Using a Roth Solo 401(k) for Real Estate
Not all custodians allow this, but IRA Financial permits Roth Solo 401(k) funds to invest in real estate.
- Contributions with after-tax dollars
- Tax-free growth of income and gains
- Tax-free qualified withdrawals in retirement
- Ability to turn real estate profits into tax-free retirement income
How to Open a Solo 401(k) for Real Estate
- Open Your Account: Easily open online with IRA Financial. A tax specialist helps customize your plan.
- Fund Your Plan: Roll over pretax retirement funds or contribute self-employment income. Roth contributions are also supported.
- Invest in Real Estate: Purchase directly with checkbook control.
- Perform Due Diligence: Research properties, neighborhoods, and market trends. IRA Financial ensures compliance but does not give investment advice.
Why IRA Financial
IRA Financial is the national leader in Self-Directed Solo 401(k) plans, serving over 27,000 clients and managing more than $5 billion in assets.
Founded by Adam Bergman, a published self-directed retirement attorney, IRA Financial provides:
- Customized plan documents
- Roth conversion options
- Checkbook control
- Loan structures
- Compliance support
The company allows clients to invest in real estate, cryptocurrencies, private businesses, precious metals, tax liens, and other alternative assets without charging asset-based fees.
Conclusion
For real estate investors, no retirement vehicle offers more power than a Self-Directed Solo 401(k). It combines high contribution limits, loan access, Roth strategies, leverage advantages, and direct control. Paired with IRA Financial, it provides institutional-grade tools without institutional restrictions.
With proper planning and a trusted custodian, a Solo 401(k) makes real estate investing in a tax-advantaged retirement account accessible, strategic, and highly effective.