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ACCOUNT TYPE

Solo 401(K)

A Solo 401(k) is similar to the more well-known employer-sponsored 401(k), except a Solo 401(k) account holder must be self-employed with no other employees. In this regard, a Solo 401(k) holder is both the employee and employer when interacting with the account.

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AT-A-GLANCE

What should you know about a Self-Directed Solo 401(K)?

Tax Benefits

Other Benefits

DISTRIBUTION RULES

What should you know about Solo 401(K) distributions?

Minimum Distribution Facts

Early Distribution Facts

BELOW AGE 59½ AGE 59½ - 72 AGE 72 OR OLDER
You may distribute cash or assets from your Solo 401(k) at any time, though a 10% early distribution penalty will apply. This penalty will be assessed on top of any applicable taxes. Upon reaching age 59½, the 10% early distribution penalty will no longer apply. Withdrawals will be taxed as regular income and need only occur at your election. You must begin taking required minimum distributions (RMDs) every year. RMDs are calculated in accordance with your age and your account value.
BELOW AGE 59½
You may distribute cash or assets from your Traditional IRA at any time, though a 10% early distribution penalty will apply. This penalty will be assessed on top of any applicable taxes.
AGE 59½ - 72
Upon reaching age 59½, you will no longer have to worry about the 10% early distribution penalty. Withdrawals will be taxed as regular income and need only occur at your election.
AGE 72 OR OLDER
You must begin taking required minimum distributions (RMDs) every year. RMDs are calculated in accordance with your age and your account value.

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GETTING STARTED

How do you fund your Solo 401(K) account?

Contributions

As an employee, a Solo 401(k) holder can contribute 100% of his or her compensation up to $19,500 in 2020 and 2021. From the perspective of the employer, a Solo 401(k) holder can contribute 25% of compensation up to $37,500.  

This brings the total annual limit for 2020 and 2021 to $57,000, plus an additional $6,500 (in employee contributions) for Solo 401(k) holders age 50 or above.

Transfers

Solo 401(k)s can only be transferred to other 401(k)s.

Rollovers

 The following account types can be transferred to or from a Solo 401(k): Traditional IRA, SEP IRA, SIMPLE IRA (if the SIMPLE has been open at least two years).

Note that you can also roll a Roth 401(k) into a Roth IRA, and vice versa.

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OTHER INVESTMENTS

ROI is everywhere if you know where to look.

No financial advisor knows you better than yourself. With a Self-Directed IRA you have the freedom to invest your tax-advantaged retirement funds in the assets you’re most passionate about. From real estate to startups to small businesses to more “out there” opportunities, if you can find it, we will help you fund it.

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EDUCATION CENTER

Want to learn more about Solo 401(K) accounts?

Essential Viewing

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Solo 401(k)s

Solo 401(K) Guide

Investor's Guide
To Solo 401(K)