QUESTION: I have recently resigned from my position with a company in which I was partners with for 19 years. I have a business opportunity that I would be going into with a partner and am interested in moving/converting my 401K that I had with my old company into a solo 401k and borrowing 30,000 for start up money for this new business. What steps would I need to take transferring the existing 401K and then borrowing for the business opportunity?
ANSWER: First, you must qualify to open a solo 401k, meaning that you need to be self-employed with not full-time employees. Further, only earned income not passive income may be taken into account when qualifying and continuing to qualify for a solo 401k. Just like all 401k plans, which are sponsored by an employer, a solo 401k is for the self-employed. Put simply, if you are not self-employed in some capacity, you will not qualify to open a solo 401k.
Second, to finish answering your questions, let’s assume that you are self-employed and thus qualify to open a solo 401k (also known as an Individual 401k), after you open the solo 401k by completing the online information on the solo 401k sign-up page, you will open a bank account for the solo 401k at your local bank or even a brokerage account at Fidelity, for example. Subsequently, you would complete your former employer 401k plan provider and complete their 401k transfer out forms and select trustee-to-trustee 401k transfer so that the movement of funds between 401k plans is not taxable. Once, the solo 401k bank or brokerage account is funded, solo 401k loan forms and payment schedule would be prepared by Mysolo401k.Net and e-mailed to you the next day.
PB in Texas