Adam Bergman

Solo 401(k) Alternative Investments: How to Diversify Beyond Stocks

For years, retirement investing has followed one main path: stocks, bonds, and mutual funds. While traditional assets still play a role, investors today are recognizing the limitations of a Wall Street-only approach. Market volatility, inflation, and shrinking expected returns have led many business owners to explore alternative options.

Enter the Self-Directed Solo 401(k), a retirement plan that lets entrepreneurs not only save more but also invest smarter. With the right structure, you can move beyond stocks into real estate, private equity, and other alternative assets.

What Is a Solo 401(k)?

A Solo 401(k), sometimes called an Individual 401(k), is designed for self-employed individuals and small business owners with no full-time employees other than themselves or a spouse.

It works like a traditional 401(k), but without the administrative burdens of corporate plans. Because the business owner serves as both employee and employer, the Solo 401(k) allows contributions from two sources, enabling much larger annual funding than any IRA.

Even more importantly, with the right plan design, a Solo 401(k) can be fully self-directed, opening the door to investment strategies most retirement accounts do not allow.

The Solo 401(k) Is Not New, But Its Power Has Evolved

The Solo 401(k) has been around for years, but how it is used has changed.

The Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001 increased contribution limits and added flexibility for 401(k) plans, making Solo 401(k)s especially valuable for entrepreneurs.

Traditional brokerage firms, however, often restrict accounts to stocks and mutual funds. This is not a legal requirement but a result of how their systems and revenue models are built.

Companies like IRA Financial created what is known as an open-architecture Solo 401(k). Instead of offering a fixed investment menu, these plans allow account holders to invest in any IRS-approved asset.

Who Is Eligible for a Solo 401(k)?

Eligibility is simple and strict. You qualify if you:

• Operate a business
• Earn self-employment income
• Employ no W-2 employees other than your spouse

This includes sole proprietors, LLC owners, consultants, freelancers, real estate professionals, and business partners.

The Advantages of the Self-Directed Solo 401(k)

Alternative Investments Inside Your Retirement Account

A self-directed Solo 401(k) allows investments beyond Wall Street, including:

• Rental property
• Private businesses
• Real estate syndications
• Cryptocurrency
• Precious metals
• Notes and private lending
• Tax liens
• Startups

This approach reduces reliance on public markets and adds resilience to retirement portfolios.

Larry Fink, CEO of BlackRock, has emphasized that the future of investing lies in private markets. JPMorgan's CEO Jamie Dimon agrees, noting that wealth creation increasingly happens in areas institutional investors access long before retail markets do. A Solo 401(k) with alternative investment capability allows small business owners to invest like institutions.

High Annual Contribution Limits

The Solo 401(k) also allows significant annual contributions. As the employee, you can defer income into the plan:

• 2025: $23,500 under age 50, $31,000 if over 50, $34,750 for ages 60–63
• 2026: $24,500 under 50, $32,500 if over 50, $35,750 for ages 60–63

Employer contributions can be added up to 25% of compensation or about 20% of net self-employment income. Maximum annual contributions are:

• 2025: $70,000 (under 50), $77,500 (50+), $81,250 (ages 60–63)
• 2026: $72,000 (under 50), $80,000 (50+), $83,250 (ages 60–63)

No IRA comes close to this level of tax-advantaged savings.

The Solo 401(k) Loan Feature

Unlike IRAs, Solo 401(k)s let you borrow against your own assets. Participants may borrow:

• Up to 50% of the account balance or $50,000, whichever is less
• Without a credit check
• Without triggering taxes
• With repayment into the account

This gives business owners liquidity without penalties.

Mega Backdoor Roth

The Mega Backdoor Roth allows high earners to make after-tax contributions and convert them to Roth accounts. In a properly structured Solo 401(k), total annual contributions of $70,000 for 2025 or $72,000 for 2026 can be converted entirely to Roth, enabling massive tax-free growth.

Simple Administration

Solo 401(k)s are easier to manage than corporate plans. If plan assets remain under $250,000, no annual IRS Form 5500 filing is required. There is no discrimination testing or extensive reporting, making the plan flexible and efficient.

Using Leverage Without UBIT

Solo 401(k)s are tax-exempt from Unrelated Business Income Tax (UBIT) on leveraged real estate under IRC Section 514(c)(9). By contrast, IRAs using nonrecourse loans are subject to UBIT, sometimes as high as 37%. For leveraged property investing, the Solo 401(k) is superior.

Why the Right Plan Design Matters

Not all Solo 401(k)s allow self-direction. Most brokerage plans remain limited to stocks and mutual funds. To access alternative investments, your plan needs:

• Custom plan documents
• Trustee authority
• Checkbook control
• Roth capabilities
• Loan provisions
• Optional brokerage access

The provider is as important as the plan itself.

Why IRA Financial

IRA Financial is the nation’s leading Solo 401(k) provider. Founded by Adam Bergman, a leading authority on self-directed retirement plans, IRA Financial has helped over 27,000 business owners and manages more than $5 billion in assets.

Unlike brokerage firms, IRA Financial:

• Does not sell investments
• Does not charge asset-based fees
• Does not give financial advice

Instead, it focuses on plan structure, compliance, and investment capability.

Conclusion

The Self-Directed Solo 401(k) is more than a retirement account. It is a private investment platform built into the tax code. It allows business owners to:

• Diversify beyond stocks
• Build large tax-deferred or tax-free balances
• Invest like institutions
• Control their financial future

The future of retirement investing is alternative, and with the right Solo 401(k), that future is available today.

by Adam Bergman

Easy Steps to Calculate Your Solo 401(k) Contribution Limits for 2025 and 2026

A Solo 401(k) is one of the most effective retirement plans available to self-employed individuals and owner-only businesses. It allows you to contribute both as an employee and as an employer, which can significantly increase how much you can save each year on a tax-advantaged basis.

That same flexibility is also what makes the rules confusing.

Contribution limits depend on income type, business structure, age, and IRS cost-of-living adjustments that change from year to year. This guide walks through the Solo 401(k) contribution rules for both 2025 and 2026, explains how to calculate your limits step by step, and highlights strategies that can help you maximize retirement savings without triggering excess contributions.

What Are the Solo 401(k) Contribution Limits for 2025 and 2026?

Solo 401(k) contributions are made in two parts:

1. Employee elective deferrals
2. Employer profit-sharing contributions

Both components count toward an overall annual limit set by the IRS. The combination of these two buckets is what makes the Solo 401(k) such a powerful retirement vehicle for business owners.

Solo 401(k) Contribution Limits Overview

These totals represent the maximum amount that can be contributed across all Solo 401(k) contribution types for the year.

Employee Elective Deferral Limits

The employee elective deferral is the portion you contribute as the employee of your business.

• 2025 elective deferral limit: $23,500
• 2026 elective deferral limit: $24,500

If your Solo 401(k) plan allows it, these contributions may be made as traditional pre-tax contributions, Roth contributions, or a combination of both.

It is important to note that employee elective deferrals are aggregated across all 401(k) plans you participate in. If you also contribute to a 401(k) through another employer, your total deferrals across all plans cannot exceed the annual limit.

Catch-Up Contributions by Age

Catch-up contributions allow older business owners to save more as they approach retirement.

• Age 50 and older

  • 2025: $7,500
  • 2026: $8,000

• Age 60 through 63

  • 2025: $11,250
  • 2026: $11,250

Catch-up contributions are added on top of the standard employee deferral limit and increase your overall annual contribution ceiling.

Catch-Up Contributions and SECURE Act 2.0 Changes

Catch-up contributions allow older savers to accelerate retirement funding, but SECURE Act 2.0 significantly changes how catch-ups work beginning in 2026.

Roth-Only Catch-Up Rule Beginning January 1, 2026

Starting January 1, 2026:

• If you are age 50 or older
• And your prior-year wages exceeded $150,000
  (for 2026 contributions, this looks at 2025 wages)
• Then all Solo 401(k) catch-up contributions must be made as Roth contributions

This rule:

• Applies to 401(k) and Solo 401(k) plans
• Does not apply to employer profit-sharing contributions
• Uses a $150,000 wage threshold that is not indexed for inflation

This change makes plan design critical. Solo 401(k) plans that do not support Roth contributions may prevent eligible participants from making catch-up contributions beginning in 2026.

Employer Profit-Sharing Contribution Limits

Employer contributions are calculated separately from employee deferrals and are based on eligible compensation.

In most cases, the employer may contribute up to 25 percent of compensation, subject to the overall annual limit.

• Sole proprietors and single-member LLCs calculate this based on adjusted net earnings
• S-corporation owners calculate this based on W-2 wages

Employer contributions are tax-deductible for the business and often represent the largest portion of total Solo 401(k) contributions.

Total Solo 401(k) Contribution Limits by Age

When employee deferrals, employer contributions, and catch-ups are combined, the total contribution limits are:

• Under age 50

  • 2025: $70,000
  • 2026: $72,000

• Age 50 and older

  • 2025: $77,500
  • 2026: $80,000

• Age 60 to 63

  • 2025: $81,250
  • 2026: $83,250

These totals define the absolute ceiling for all contributions made to the plan for the year.

How Contribution Calculations Differ by Business Type

Sole Proprietors and Single-Member LLCs

For sole proprietors, contributions begin with Schedule C net profit. From there, you must:

1. Calculate self-employment tax
2. Deduct half of that tax
3. Subtract employee elective deferrals
4. Apply the effective employer contribution rate, which is approximately 20 percent of adjusted net earnings

Failing to deduct half of self-employment tax is one of the most common calculation errors and often leads to over-contributions.

S-Corporation Owners

For S-corporation owners, Solo 401(k) contributions are based entirely on W-2 wages.

• Employer contributions may be up to 25 percent of W-2 wages
• Employee deferrals follow the standard IRS limits

Because payroll drives contribution capacity, reasonable and well-documented compensation is essential.

Advanced Strategies to Maximize Solo 401(k) Contributions

Mega Backdoor Roth Solo 401(k)

A Mega Backdoor Roth strategy allows you to:

1. Max out employee elective deferrals
2. Max out employer profit-sharing contributions
3. Use remaining space under the total limit for after-tax contributions
4. Convert those after-tax funds to Roth

For example, in 2026, a participant under age 50 could potentially contribute up to $72,000 in total if income supports it. Any unused space after employee and employer contributions may be available for after-tax contributions, provided the plan allows it.

Spousal Solo 401(k) Contributions

If a spouse earns eligible compensation from the business, each spouse may participate in the Solo 401(k).

This can effectively double household retirement contributions while maintaining full tax advantages, as each spouse is subject to their own annual limits.

Contribution Deadlines to Know

• Employee elective deferrals must be withheld and deposited according to payroll timing rules
• Employer profit-sharing contributions are generally allowed up to the business tax filing deadline, including extensions
• Form 5500-EZ is required once plan assets exceed IRS thresholds

Understanding these deadlines allows business owners to manage cash flow while remaining compliant.

Final Thoughts

Solo 401(k) contribution rules offer unmatched savings potential, but they require careful calculation and up-to-date knowledge of IRS limits. With the correct 2025 and 2026 numbers in hand, business owners can confidently plan contributions, avoid excess contribution penalties, and take advantage of advanced strategies like Roth conversions and spousal planning.

Using a properly designed Self-Directed Solo 401(k) that supports Roth, after-tax contributions, and clear compliance reporting can make the process far easier and help ensure every dollar is working efficiently toward long-term retirement goals.

by Adam Bergman

Checkbook 401(k) Plans: How a Solo 401(k) Unlocks Control Over Alternative Investments

Most Americans associate retirement investing with mutual funds, ETFs, and stocks. But for business owners, consultants, and independent professionals, retirement planning does not have to stop at Wall Street. The Solo 401(k) has quietly become one of the most powerful tools in the financial world, not just for saving, but for controlling how retirement money is invested. When structured correctly, a Solo 401(k) can offer checkbook control, allowing the investor to buy real estate, lend money privately, invest in funds, and participate in the private economy, all within a tax-advantaged retirement plan.

Not all Solo 401(k) plans are created equal. Understanding the difference between a traditional brokerage-based Solo 401(k) and a true checkbook control plan is the key to unlocking its full potential.

What Is a Solo 401(k)?

A Solo 401(k), also known as an individual 401(k), is a retirement plan designed for self-employed individuals and business owners with no full-time employees other than themselves and a spouse. The law allows the business owner to make contributions as both the employee and the employer, resulting in significantly higher annual savings limits than any IRA.

The Solo 401(k) works like a traditional company retirement plan but without the administrative complexity. It allows the owner to build retirement savings faster and with more flexibility than typical retirement accounts.

Not All Solo 401(k) Plans Are the Same

Many people assume opening a Solo 401(k) at a brokerage firm gives them full investing freedom. Unfortunately, that is rarely the case.

Most brokerage firms design Solo 401(k) plans to function just like standard investment accounts. They limit investment choices to stocks, bonds, ETFs, and mutual funds. These platforms are built around selling financial products rather than providing true investment control.

A self-directed Solo 401(k) works differently. It is designed for control and flexibility. It allows business owners to invest in alternative assets that are often unavailable through traditional brokerage platforms. What distinguishes a self-directed Solo 401(k) is how the plan is written, administered, and supported, not just its label.

What Is Checkbook Control?

Checkbook control means the Solo 401(k) trustee, usually the business owner, has direct authority over plan funds. Instead of instructing a financial institution to execute transactions, the trustee manages investments directly from a plan bank account. Purchases, payments, and investments happen without custodian approval or delays. Properly structured checkbook control provides the same operational freedom as a personal business account while preserving retirement account tax advantages.

What Counts as an Alternative Investment?

Alternative investments are assets outside traditional stocks, bonds, and mutual funds. The IRS does not prohibit private investing inside a retirement plan. It prohibits self-dealing.

A Solo 401(k) may invest in almost anything except life insurance, collectibles, and transactions involving disqualified persons under Internal Revenue Code Section 4975. Permissible alternative investments include:

• Real estate
• Private lending
• Private equity
• Venture capital
• Hedge funds
• Precious metals
• Tax liens
• Private businesses
• Crowdfunding investments

The only rule is that the investment must benefit the plan and not the individual personally.

Why the Solo 401(k) Is So Powerful

The Solo 401(k) is considered the most powerful retirement plan available because of its combination of funding capacity, flexibility, and tax control.

One of its biggest advantages is contribution size. In 2025, the employee contribution limit is $23,500 if under age 50, $31,000 if over 50, and $34,750 for ages 60 to 63. In 2026, those limits rise to $24,500, $32,500, and $35,750 respectively. In addition to employee contributions, the business may make employer profit-sharing contributions. This allows total contributions in 2025 of up to $70,000 for those under 50, $77,500 for those over 50, and $81,250 for ages 60 to 63. In 2026, total limits increase to $72,000, $80,000, and $83,250. Few retirement plans allow investors to deploy this level of capital so efficiently.

The Solo 401(k) Loan Feature

Another feature that sets the Solo 401(k) apart is the loan option. Qualified participants may borrow up to the lesser of $50,000 or 50 percent of their account balance. There is no credit check, and the repayment goes back into the account. Interest paid on the loan is paid to the participant’s own retirement plan. When structured correctly, the loan does not create a taxable event. This flexibility provides an emergency liquidity tool that does not exist with an IRA.

Mega Backdoor Roth Strategy

The Mega Backdoor Roth is a powerful strategy for high-income earners. Participants may make after-tax contributions of up to $70,000 in 2025 or $72,000 in 2026 and convert them into Roth accounts inside the plan. The result is potentially tax-free growth on a much larger scale than a traditional Roth IRA allows. Not all Solo 401(k) plans permit this strategy, so it must be built into the plan document.

Simplified Administration

Despite its power, the Solo 401(k) is one of the simplest plans to manage. If plan assets remain under $250,000, no annual IRS filing is required. There is no discrimination testing, no required third-party administrator, and minimal annual maintenance. This makes it both flexible and efficient.

UBIT Advantage for Real Estate Investors

When IRAs borrow money to buy real estate, the IRS imposes Unrelated Business Income Tax (UBIT) on debt-financed income and gains. However, Solo 401(k) plans are exempt from this tax under IRC Section 514(c)(9). This provides a major advantage for real estate investors who wish to use leverage without triggering taxation. This exemption does not exist for IRAs, regardless of structure.

Two Types of Checkbook Control in Solo 401(k) Plans

Checkbook control can be structured in two primary ways: directly through the plan itself or through an LLC owned by the plan. Both approaches allow the business owner to control retirement funds without custodian permission or transaction delays, but they differ in how investments are executed and how liability and privacy are handled.

The first approach is a standard self-directed Solo 401(k) with direct purchasing authority. The business owner works with a specialized provider to establish a plan specifically written for alternative investments. Plan documents are customized based on business type, income structure, and retirement objectives to ensure full IRS compliance while maximizing tax advantages. Once established, the trustee opens a bank or brokerage account in the name of the Solo 401(k). All investments are then made directly from the plan.

The second approach adds a legal layer through a limited liability company (LLC). The Solo 401(k) first establishes and owns a single-member LLC. The plan funds the LLC with retirement assets. The LLC opens its own bank account, and all investments are made in the name of the LLC rather than the plan itself. The trustee serves as manager of the LLC, providing day-to-day authority while the retirement plan remains the sole owner.

Adding an LLC offers liability protection and privacy. Public records list the LLC rather than the individual or retirement account, and the LLC provides a legal boundary between retirement funds and outside risk. Both structures provide full checkbook control. The choice depends on investment type, risk exposure, and preference for privacy. Investors with multiple properties, loans, or operations in litigious industries often prefer the LLC structure, while those with limited investments may opt for direct ownership.

In both approaches, the process begins the same way. The investor works with a self-directed Solo 401(k) provider that understands alternative assets and tax law. The plan must be properly designed, documented, and implemented to allow full investment flexibility and Roth conversion strategies. Once implemented, the trustee opens the appropriate financial accounts and begins deploying retirement funds directly through the plan or through the LLC.

Why IRA Financial

IRA Financial is the industry leader in self-directed retirement planning. Founded by tax attorney Adam Bergman, the firm has helped tens of thousands of Americans take ownership of their retirement strategies. IRA Financial does not sell investments; it engineers retirement plans. The company focuses exclusively on checkbook control structures, compliance design, and tax efficiency. Services include plan documents, Roth strategies, compliance support, and transaction guidance, all handled in-house.

Conclusion

A Solo 401(k) is not simply a retirement account. It is a financial operating system. When paired with checkbook control, it becomes a platform for building long-term wealth beyond public markets. It offers savings power, flexibility, control, and tax advantages unmatched by any other retirement plan.

If you want real freedom to decide how your retirement money is invested, a checkbook Solo 401(k) provides it. With the right provider, it can change the way you think about retirement forever.

by Adam Bergman