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Solo 401(K)s: Alternative Investing for Business Owners

By   ·  2 minute read

What exactly is a Solo 401(K) and who qualifies for this type of plan? This plan is exclusively for business owners that have no other full-time employees besides the owner and their spouse. It offers greater flexibility in investment options than your standard employer 401(K), including alternative investments, and greater contribution potential. Businesses that can participate include S-Corps, LLCs, sole proprietorships, partnerships, and C-Corps. This also includes contract work for businesses like Uber, Lift, Doordash and Postmates, even if it is just a “side hustle” you can utilize this type of plan.

What does this mean for you? Solo 401(K) plans open the door to real estate investment opportunities, including Trust Deeds with Ignite Funding where you can earn 10%-12% in annualized interest.

Benefits of Investing with a Solo 401(K) at Ignite Funding:

Greater ease in reaching the minimum to invest:

Compared to your standard Traditional or Roth self-directed IRAs, Solo 401(K)s have a much higher maximum contribution limit. If you were looking to open a new self-directed IRA account, you would not be able to invest right away unless you had funds from another plan you could rollover. You would either need to find another way to grow your funds or wait until you can make your next annual contribution. In a Solo 401(K), per the IRS, the owner can contribute:

  • Elective deferrals up to 100% of compensation (“earned income” in the case of a self-employed individual) up to the annual contribution limit:
    • $23,000 in 2024 ($22,500 in 2023; $20,500 in 2022; $19,500 in 2020 and 2021), or $30,000 in 2023 ($27,000 in 2022; $26,000 in 2020 and 2021) if age 50 or over; plus
  • Employer nonelective contributions up to:
    • 25% of compensation as defined by the plan, or
    • for self-employed individuals, see discussion below

If you’ve exceeded the limit for elective deferrals in your 401(k) plan, find out how to correct this mistake.

Total contributions to a participant’s account, not counting catch-up contributions for those age 50 and over, cannot exceed $69,000 for 2024 ($66,000 for 2023; $61,000 for 2022; $58,000 for 2021; $57,000 for 2020).

That amount would allow an investor to quickly surpass the minimum investment at Ignite Funding of $10,000.

Your monthly interest can be exempt from taxes:

All income and gains generated by the investment will flow back to the 401(k)-plan tax deferred or tax free depending on how the account is set up. For example, if you invest $50,000 with a Roth Solo 401(K) plan at Ignite Funding you could earn an annualized rate of 10%, and the $5,000 you earned in interest for the year will be tax free.

Keeps your portfolio diversified:

Investing in Trust Deeds with Ignite Funding allows you to invest in real estate without requiring the type of capital needed to own and manage a rental property. Real estate is completely diversified from the stock market.

Not all Solo 401(K) Plans are created equal, and these opportunities may be limited by the provider you have chosen to help you manage your account. Big name companies will usually offer low cost/fee accounts, but with investment options exclusive to their own mutual funds, ETF’s, and stocks. Find a reputable company or custodian that will allow you to utilize the full range of investments allowed under a Solo 401(K) plan.

If you have the right plan to start investing in real estate and are interested in learning more about Trust Deed investing with Ignite Funding, you can schedule a free consultation with one of our investment representatives by clicking here.

If you have performed your due diligence and are ready to have your funds earning 10%-12% annually, click here and you will be taken to our “Get Started” page. From there you can select the Investor Account Application, Custodial Account.