QUESTION:
For solo 401k, are we allowed to invest in annuities?
ANSWER:
Yes, a solo 401k may be invested in annuities whether fixed or variable annuities.
Owner:
When a solo 401k plan invests in an annuity, the annuity is owned by the solo 401k plan. This means the annuity policy is required to reflect the solo 401k as the owner, so as follows:
If the name of the solo 401k is Palm Tree Trust and the trustee’s name is Jane Do, then the annuity policy will reflect the owner as follows: jane Do, Trustee of Palm Tree Trust
Beneficiary
The beneficiary of the annuity will also be the solo 401k. Reason being, upon the death of the annuitant, the proceeds from the annuity will need to flow back to the solo 401k. Then, upon the death of the solo 401k owner, the solo 401k funds will flow to the beneficiary of the solo 401k.
Annuitant
The annuitant of the annuity is the trustee of the solo 401k. John Do, in our example above.
