The Solo 401K is a self directed retirement trust that allows the Trustee of the Solo 401K Trust to direct his or her retirement funds into investments that they know how to make money at. Whether that may be a real estate investment or business, the Solo 401K has several advantages over the typical self directed IRA.

1. The ability of the Trustee of the Trust (usually the person who’s funds are held by the trust) to make decisions regarding investments and conduct business operations of the trust without having to use another 3rd party such as a Custodian or Administrator to facilitate transactions or execute business decisions the Trustee wants to make.

2. There are much larger contribution limits for the Solo 401K and potential for the investor to make “catch-up” contributions into the Trust.

3. There is no UBIT (unrelated business income tax) potential as UBIT is not a tax that the 401K ever has to pay. So if someone wants to use leverage such as a non recourse loan to buy real estate as an investment the trust can do so without ever having to pay any UBIT. (see my blog on UBIT and on the topic on our learning center).

There may be other reasons that someone who is interested in setting up a self directed retirement plan or account would want to use the Solo 401K as the investment vehicle of choice. I would suggest that you research and contact any of the Facilitators on our Resources page of the website and find out if this is the right vehicle for investing for your retirement.