The Ultimate Solo 401(k) FAQ

• Higher contribution opportunities

• Participant loan availability (if the plan permits)

• Broader investment flexibility with self-directed plans

• Potential Roth option

• Employer contribution capability

Can I Roll Over an Old 401(k)?

Often, yes.

If you've left your employer, you may be able to roll eligible assets from a traditional employer-sponsored 401(k) into your Solo 401(k), provided your plan accepts rollovers and IRS rules are met.

Can I Roll Over Other Retirement Accounts?

Depending on IRS rules and your plan, eligible rollovers may include:

• Traditional 401(k)s

• 403(b)s

• Governmental 457(b)s

• Traditional IRAs

• SEP IRAs

• SIMPLE IRAs (after the required holding period)

Roth IRA rollover rules differ and should be reviewed carefully.

What Can a Solo 401(k) Invest In?

Depending on plan provisions and IRS rules, investments may include:

• Stocks

• Bonds

• Mutual funds

• ETFs

• Real estate

• Private lending

• Certain IRS-approved precious metals

• Tax liens

• Private companies

• Limited partnerships

• Promissory notes

What Investments Are Not Allowed?

Examples generally include:

• Collectibles

• Most artwork

• Alcohol collections

• Antique furniture

• Rugs

• Gems

• Personal-use property

Certain transactions involving disqualified persons are also prohibited.

Can My Solo 401(k) Buy Real Estate?

Yes.

Many self-directed Solo 401(k)s permit real estate investments.

Examples include:

• Rental homes

• Commercial buildings

• Raw land

• Industrial property

• Storage facilities

• Apartment buildings

However, IRS prohibited transaction rules must always be followed.

Can I Live in Property Owned by My Solo 401(k)?

No.

Retirement assets cannot generally be used for your immediate personal benefit.

Personal use would typically create a prohibited transaction.

Can My Solo 401(k) Buy a Vacation Home?

Not for personal use.

Any investment property owned by the plan must remain an investment for the benefit of the retirement account.

Can My Solo 401(k) Buy Gold?

Yes.

Certain IRS-approved precious metals may be permitted.

Collectible coins generally are not.

Can My Solo 401(k) Invest in Cryptocurrency?

Some self-directed plans permit cryptocurrency investments.

Investors should carefully evaluate custodial requirements, security, volatility, and IRS guidance before investing.

What Is Checkbook Control?

Checkbook control allows the Solo 401(k) trustee to execute qualified investments directly from the plan's bank account rather than waiting for custodian approval for every transaction.

This may allow greater efficiency when making investments.

Can I Borrow From My Solo 401(k)?

Many Solo 401(k) plans include participant loan provisions.

Loans are subject to IRS limits, repayment schedules, and plan provisions.

IRAs generally do not offer participant loans.

What Is a Prohibited Transaction?

A prohibited transaction is an action that violates IRS retirement plan rules.

Examples may include:

• Using retirement assets for personal benefit.

• Selling personal property to the plan.

• Purchasing property from yourself.

• Paying yourself for managing plan-owned assets.

• Engaging in certain transactions with disqualified persons.

Violations may have significant tax consequences.

Who Are Disqualified Persons?

Examples generally include:

• You

• Your spouse

• Parents

• Grandparents

• Children

• Grandchildren

• Certain entities they control

Understanding these rules is essential before making alternative investments.

What Is a Non-Recourse Loan?

A non-recourse loan allows a retirement plan to finance certain investments without creating personal liability for the account owner.

These loans are commonly discussed in connection with real estate investing.

Do I Need to File Form 5500-EZ?

Possibly.

IRS filing requirements generally depend on factors such as total plan assets and whether the plan is terminating.

Review current IRS requirements each year.

Can I Make Roth Contributions?

Many Solo 401(k) plans include a Roth feature.

Roth contributions are generally made with after-tax dollars, and qualified withdrawals may be tax-free.

What Happens If I Hire Employees?

Hiring common-law full-time employees may affect your eligibility to continue operating a Solo 401(k).

If your business grows, you may need to transition to another type of qualified retirement plan.

What Happens If I Close My Business?

Closing your business does not automatically eliminate your retirement savings.

Depending on your circumstances, you may:

• Terminate the plan

• Roll eligible assets into another qualified plan

• Maintain the account under applicable rules

What Happens When I Retire?

When you retire, you'll generally begin planning how and when to take distributions according to IRS rules.

Distribution timing depends on your age, plan type, and applicable regulations.

Should I Leave My Old 401(k) Behind?

Every situation is different.

Some people choose to leave assets with a former employer.

Others roll eligible assets into a Solo 401(k) or another retirement account for:

• Simplicity

• Investment flexibility

• Easier management

• Consolidation

Can I Have More Than One Solo 401(k)?

You may establish more than one Solo 401(k) under certain circumstances, but contribution calculations can become more complex.

Consult a retirement professional before doing so.

How Long Does It Take to Open a Solo 401(k)?

The timeline varies by provider but generally ranges from a few business days to a couple of weeks, depending on documentation requirements.

How Often Should I Review My Solo 401(k)?

At least annually.

Many investors also review:

• Investments

• Contributions

• Beneficiaries

• Plan documents

• Tax planning opportunities

• Business income

What Are the Biggest Benefits of a Solo 401(k)?

Many business owners choose a Solo 401(k) because it may offer:

• High contribution opportunities

• Tax advantages

• Roth contribution option

• Participant loan feature

• Investment flexibility

• Real estate investing

• Private lending

• Checkbook control

• Rollovers from eligible employer plans

• Consolidated retirement management

Final Thoughts

A Solo 401(k) is one of the most powerful retirement planning tools available to eligible self-employed individuals and business owners whether you're operating a full-time business or earning income through a side hustle, understanding how a Solo 401(k) works can help you make informed decisions about your financial future.

While retirement planning can seem complex, it doesn't have to be overwhelming. By learning the rules, understanding your options, and reviewing your plan regularly, you can take advantage of the flexibility and opportunities a Solo 401(k) may provide.

If you're beginning your research, think of this FAQ as a starting point. As your business grows and your retirement goals evolve, continue educating yourself and work with qualified tax and financial professionals to ensure your strategy aligns with current IRS rules and your long-term objectives.

Disclaimer

This FAQ is intended for educational purposes only and should not be considered legal, tax, financial, or investment advice. IRS rules, contribution limits, eligibility requirements, rollover provisions, and retirement plan regulations may change over time.