Checkbook 401k Retirement Plan Options and Investment Strategies

The checkbook 401k is a flexible and cost-effective way to save for retirement, allowing you to invest your retirement funds directly into a self-directed IRA.

You can hold a wide range of investments in a checkbook 401k, including real estate, private companies, and cryptocurrency.

One of the most significant benefits of a checkbook 401k is that it allows you to make loans from your retirement account, which can be helpful in times of financial need.

These loans can be made directly from your retirement account, and you can repay them with interest, which will be deducted from your retirement account.

A Solo 401(k) is a retirement plan designed specifically for self-employed individuals or small business owners with no full-time employees, aside from a spouse.

It offers the same benefits as a traditional 401(k), including tax-deferred growth and the ability to make substantial contributions each year.

The Solo 401(k) allows you to contribute both as an employee and as an employer, maximizing your retirement savings potential.

It provides significant flexibility with contribution limits and offers features like tax advantages and loan options that can benefit self-employed individuals.

A Solo 401k plan is generally also referred to as a “checkbook control” Qualified Retirement Plan.

This type of plan is perfect for sole proprietors, small businesses, and independent contractors.

With a “checkbook control” structure, you'll have complete control over your retirement funds and won't have to seek the consent of a custodian to make an investment.

You'll never have to pay excessive custodian account fees based on account value and per transaction.

By having “checkbook control” over your retirement funds, you'll gain the ability to make decisions without needing approval from a custodian.

You can invest in real estate or tax liens by simply writing a check from your Solo 401k Plan bank account.

A Solo 401(k) plan allows for high contribution limits, enabling you to contribute both as an employee and an employer, which can maximize your retirement savings potential.

As a self-employed individual or small business owner, you can make profit-sharing contributions up to 25% of your compensation, further increasing the amount you can contribute to your retirement each year.

You can also borrow from your Solo 401(k) account, offering financial flexibility, and loans must be repaid with interest within five years without penalties if the rules are followed.

Spousal contributions are also allowed, allowing for doubled contributions and greater retirement savings for your household, if your spouse is employed by your business.

With a self-directed Solo 401(k), you can invest in a variety of options, including alternative assets.

You can invest in a wide range of assets beyond traditional stocks and bonds, giving you the flexibility to diversify your retirement portfolio.

With checkbook control, you can make investments without needing to get each one approved by the custodian, allowing you to make decisions quickly and easily.

You can simply write a check and use the funds straight from your Plan bank account to make investments, such as real estate or tax liens.

A Solo 401(k) Plan can be customized for maximum tax benefits, including provisions for annual Roth contributions of up to $108,000 – $120,000 for couples aged 50 and above.

You can also roll other retirement funds into the plan, such as pre-tax IRA funds, to magnify the power of the Checkbook K.

Solo 401(k) plans permit rollovers from other retirement plans, including traditional IRAs, SEP IRAs, or even a previous employer’s 401k, 457 or 403B.

The Solo 401(k) offers a high contribution limit, with a standard contribution limit of $23,500 for employee salary-deferral contributions and $70,000 for employee salary-deferral and employer profit-sharing contributions in 2025.

You can contribute as much or as little as you want up to the maximum limit, so you have flexibility in your retirement savings.

The catch-up contribution limit for those 50 and older is $31,500 for employee salary-deferral contributions and $77,500 for employee salary-deferral and employer profit-sharing contributions in 2025.

A Super Catch-Up Contribution Limit of $34,750 for employee salary-deferral contributions and $81,250 for employee salary-deferral and employer profit-sharing contributions is available for those aged 60-63 beginning in 2025.

Here's a breakdown of the contribution limits:

These contribution limits can help you save a significant portion of your income for retirement.

To be eligible for a Solo 401(k) or Checkbook 401(k) plan, you must have some self-employment income.

Self-employment income includes all earned income from a trade or business, regardless of whether it comes from an LLC, corporation, sole proprietorship, or unincorporated entity.

Real estate rental income does not count towards self-employment income, but real estate commissions, loan broker commissions, property management fees, and real estate wholesaling profits do.

A business can't have any employees other than the owner's spouse, and in a partnership, only self-employed partners and their spouses are permitted as employees.

To contribute to a Solo 401(k), you must receive a salary or wage from self-employment, and the plan must be the only retirement plan maintained by the business.

The business entity must be established by the last day of the business's tax year to allow employee salary deferral contributions for that year, while employer contributions can be made up until the business's tax filing deadline, including extensions.

Full-time employees that disqualify a business-owner from having a Checkbook Solo 401(k) are those that work more than 1,000 hours per year and are over 21 years of age.

A Solo 401(k) offers high contribution limits, allowing you to contribute both as an employee and an employer, maximizing your retirement savings potential.

With a Solo 401(k), you can contribute up to $70,000 annually, and if your spouse generates income from the business, they can also make contributions. This flexibility helps you save a large part of your yearly income.

You can even suspend contributions in case of financial need, and you're allowed to contribute as much or as little as you want up to the maximum limit.

A Solo 401(k) allows you to invest in a variety of assets, including real estate, which can generate tax-free income through a Checkbook 401(k).

You can also roll over other retirement funds into a Solo 401(k), including pre-tax IRA funds, to maximize your retirement savings.

One of the key benefits of a Solo 401(k) is the ability to make profit-sharing contributions, which can be up to 25% of your compensation, further increasing the amount you can contribute to your retirement each year.

Here's a comparison of the main features of a Traditional Solo 401(k) and a Roth Solo 401(k):

Overall, a Solo 401(k) offers a range of benefits, including high contribution limits, loan options, and spousal contributions, making it an attractive option for self-employed individuals and small business owners.

With a Solo 401k plan, you can make leveraged investments without triggering the UBTI tax.

This is a major advantage for real estate investors, as it allows them to use mortgage to leverage their investments without incurring a 37% tax on Unrelated Debt Financed Income (UDFI).

The Solo 401k plan offers a UBTI exemption, which is a significant benefit for those who want to invest in real estate using leverage.

This exemption can save investors a substantial amount of money in taxes, making it a compelling reason to consider a Solo 401k plan for your retirement savings.