This broad financial review of Solo 401k provides the ultimate Solo 401k high-level guidance to investing in alternative assets, including real estate, cryptocurrency, Bitcoin, hard-money lending, private lending, private equity, tax liens, gold & silver, and many other alternative assets.
Ultimate Solo 401k Questions
- What are the benefits of investing with a solo 401k?
- What are the drawbacks of investing with a Solo 401k?
- Should I be deterred by Solo 401k administration?
- Who should consider Solo 401k investing?
Ultimate Solo 401k Answers
What are the benefits of investing with a Solo 401k?
A Sol0 401k provides 2 forms of tax-advantaged asset-growth: (a) Tax-deferred growth on Solo 401k tax-deductible contributions and (b) Tax-free growth on Roth Solo 401k contributions.
Solo 401k Tax-deductible contributions are great for investment returns because they provide the greatest investment principal and thus the greatest long-term investment compounding of returns. A complete discussion of the incredible power of long-term compounding of returns is beyond the scope of this article. For an overview of the effects of compounding, you can see this Investopedia page. However, although Solo 401k Tax-deductible contributions will give you the greatest returns all those funds will eventually be taxed. Of course, there are strategies to reduce those taxes when they come due in the distant future.
Solo 401 Roth Contributions are great for investment returns because Roth investment returns are Totally Tax-Free, forever. Solo 401k Roth contributions are made with after-tax money, so your initial investment principal may be smaller, but you benefit from getting all the growth on those contributions without ever paying taxes on it.
Solo 401k Roth Contributions are optimal for investments with asymmetric growth potential; meaning, the upside potential that exceeds other investments. In such a case, when the profits & growth will be substantial relative to the principal invested, Roth Solo 401k is the way to go. This will shelter all that growth from the IRS, forever and ever.
What are the drawbacks of investing with a Solo 401k?
The drawback of investing with a Solo 401k is that the funds must be used for investment only and not for personal use. If you need money for non-investment purposes, you can take advantage of a Solo 401k Loan Option. If, however, you’re hyper-focused on maximizing your wealth, the Solo 401k is an incredible tool with no drawbacks.
Should I be deterred by Solo 401k administration?
Solo 401k Administration is relatively simple – but it is something that have to do if you want to benefit from the wealth-building power of a Solo 401k. Once your Solo 401k assets exceed $250,000 there’s a simple annual filing requirement with the IRS. It’s even called Form 5500-EZ for “one-participant plans.” As part of your Solo 401k implementation, we at ReSure will educate you about Solo 401k Administration.
Who should consider Solo 401k investing?
Anybody that qualifies for a Solo 401k should consider getting one for both tax-strategy and investment strategy. A ReSure Solo 401k is the ideal financial tool for (a) tax-reduction, (b) tax-free investing, (c) alternative investments, and (d) checkbook control of tax-sheltered retirement money. A ReSure Solo 401k provides incredible value and is the most cost-effective and versatile financial tool available.
If a Checkbook 401(k) is not the right fit for you, a Self-Directed IRA with Checkbook Control may be a great solution.
That’s all for our broad financial review of Checkbook Solo 401k Plans. In the coming post in this series, we’ll provide a no non-sense financial Solo 401k review.