Referred by others names such as Self-Directed Solo 401k, Solo 401k, Solo K or Small 401k, a self-directed 401k plan may be right for you based on the following.
Qualification
If you are considering investing in alternative investments such as real estate, notes, small companies or gold, a self-directed 401k may be right for you. However, you must first determine if you qualify for a small company 401k because a self-directed 401k plan is designed for the individual business owner or self employed and his or her spouse.
Excluded
As a small business owner, you still qualify for a self-directed 401k plan even if you have other employees. You see the law permits you to exclude from a self-directed 401k the following types of employees:
Those under age 21
Part time employees (work less than 1,000 hours per year)
Union employees
Non-resident aliens with no U.S. income
Some Advantages
- No income limit restrictions for Roth contributions
- You can invest in an S corporation
- Option to buy life insurance
- Permitted to borrow (take a personal loan) up to $50,000 or 50% whichever is less
- Gains from leveraged real estate purchases are not subject to Unrelated debt-financed income (UDFI) Tax (refer to IRS Publication 598 for information on UDFI)
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