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Solo 401k Loans

Are there any additional advantages of a Solo 401k versus other self employed retirement plans?

Another potential advantage of a solo 401k versus other self employed retirement plans such as a SEP-IRA or Keogh retirement plan is the ability to take tax free solo 401k loans from the accumulated balance of the solo 401k. Provided a solo 401k has a loan provision, tax free solo 401k loans are permitted up to 50% of the total value of the solo 401k up to a maximum of $50,000. Solo 401k loans must be repaid according to the terms of the loan amortization schedule and generally have a 5 year maximum repayment term. Failure to repay the loan according to the loan amortization schedule may result in a loan default. Loan defaults may cause taxes as well as IRS penalties.

If a self employed business owner would like to receive a solo 401k loan, they have the opportunity to consolidate retirement assets by doing a rollover or transfer of their existing retirement accounts into a solo 401k. Retirement accounts that are permitted to be rolled over into a solo 401k include traditional IRAs, SEP IRA, previous employer's 401k plans, Keogh plans (money purchase/profit sharing plans), defined benefit pension plans, 403b plans and Rollover IRAs. Roth IRAs may not be rolled over into a solo 401k unless the solo 401k plan document permits after tax salary deferral contributions.

Once the assets have been transfered into your solo 401k for 10 business days, you are immediately eligible for a solo 401k loan. A solo 401k loan can be used for any purpose and there are no income or credit qualifications to receive the loan.

Solo 401k Frequently Asked Questions

FAQs. Find answers to your questions about the Solo 401k.


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*The information on this page is for informational purposes only and does not constitute, and should not be construed as, professional, legal or tax advice. To determine your individual tax situation and specific needs, please consult a professional tax advisor.

*Information contained in these sections merely highlight some benefits. There are risks involved with all investments that could include tax penalties and risk/loss of principal.