Like most of you, i am amazed at how much information is out there. How much Google returns in a simple search and how i have learned to get really good with the “Advanced Search” options within Google in order to limit my search results and get to the very focused resources i want to review…
Solo 401k is no different than any other topic. There are millions of pages out there online. How does one sort through it all? Well, that’s one of our purposes here.
As with many things in life and online — buyer/reader beware. We do our best to find good info and to vet these sources, but still it is always best to keep your guard up. Here at AllBusiness there’s a great team of editors and advisors who work hard and smart to find the best content.
All that said — i was just searching for clarification on how to borrow from my own solo 401k. I found an article on Edward Palonek’s site that was written by an attorney about exactly this topic. While Gary Anderson, my biz partner and favorite expert, will talk more about these sorts of rules from a CPA perspective in a future post — this article by Craig Gillooly offered this nugget:
From Edward’s site:
“Loans: You may borrow up to 50% of your account balance (up
to a $50,000 loan) and repay it over fiv years (or longer, if the loan
is used to acquire a principal residence). Interest is paid back into
your own 401k plan at around prime plus 1%. The interest paid is
expressly nondeductible, regardless of the purpose of the loan. (You
cannot borrow from a SEP-IRA or IRA, but you can roll a SEP-IRA or IRA
into your Solo 401k and then borrow from it.)”
Bingo, that’s just what i wanted to know. Sure beats trying to figure out on the IRS site and within the more cumbersome tax documents… Of course, this is why i’ll also consult with Gary Anderson again and have him blog about the whys and hows and intricacies of borrowing out of your own self-directed solo 401(k) retirement account. It is a useful option to know more about — depending on your investment needs.
P.S. If you are a CPA or financial advisor, Gary Anderson is a wealth of info and his
blog posts will continue to provide ideas and tips for helping your
clients with this valuable investment option. Click through to his bio to contact him personally for more examples, plus we’ll be blogging about success stories at our consumer oriented blog (in my bio) and welcome your stories and comments here on AllBusiness and there.