Brian Davis San Diego Self-Directed 401 (k) Specialist says “The one-participant 401 (k) plan or Solo 401 (k) plan as it’s often called, is overlooked by so many self-employed individuals, and has so many benefits that I hope more and more people take the time to learn about it”
The self directed 401(k) plan (also referred to as Solo 401 k) is a retirement plan that is specifically designed for owner-only businesses as well as spouses. It gives them a chance to use their retirement funds to do any type of investment tax free on their own even without the consent of a custodian. It also allows them to make contributions (up to $53000 & $59000 for those under age 50 & above age 50 respectively). Additionally, they can also borrow (up to $50000) for any purpose.
Advantages of using self directed 401(k) plan over the other forms of retirement plans
1) Checkbook control
This is a great advantage of self directed 401 k plan. Unlike the other plans, you are not required to hire a trust company or a bank to serve as your trustee/custodian. You can open the account at any local credit union or bank and serve as a trustee yourself. This allows you to gain checkbook control over your funds. Your entire assets are under your authority therefore you can act quickly whenever you come across the right investment.
2) Tax free loan
With this plan, you can borrow up to $50000 (or 50% of the value of your account) for any purpose (e.g. mortgage payments, credit card bills, personal/business investments etc). The loan should be paid back over a period of 5 years and there is no prepayment penalty.
3) High contributions limit
The self directed 401(k) plan allows you to make a maximum contribution of up to $53000 (if you are under age 50) and $59000 (if you are above age 50). These amounts can either be made after tax or pretax.
4) Use leverage tax free
Unlike IRA, self directed 401k plan is exempt from Unrelated Dept Financed Income (UDFI). This means that Internal Revenue Code Section 514(c) (9) allows it to use nonrecourse leverage to make real acquisitions without penalty or tax.
5) Easy administration
The Solo 402 (k) is easy to operate and administer. You are not required to do annual filing unless the assets in your plan exceed $250,000 (if this is the case you will be required to file short information with the IRS).
“The 401 (k) plan is for the self-employed individual, and spouse if needed, whether they’re just a sole proprietor, have incorporated via an S-Corp or C-Corp, or an LLC.” Says Davis, “This allows such a large tax write off every year, there’s a way to have a Roth portion of the account and with the options of having checkbook control it’s an amazing plan. The beauty of our plan is also that ability to invest in non-publicly traded assets like real estate, notes, precious metals, and private companies. There’s so many benefits I can’t even list them all here.”
You can see more about and by Brian Davis on his Web Site http://accuplansandiego.com
On Small Business Trendsetters
and on CNN iReport http://ireport.cnn.com/docs/DOC-1216001