QUESTION: From your web site, I cannot easily determine if a solo 401(k) is an appropriate vehicle for what I want to do. If so, I look forward to working with you. Here’s my plan: I intend to roll over funds from an existing 401(k). That account is from a former employer, and I intend to roll over only a portion of that account. I am currently self-employed, and do not participate in any retirement account. I am using a portion of the rolled over funds to invest in a restaurant, and I am going to create a participant loan to pay off some existing credit card debt with the rest.
If I am eligible, and can do what I intend to do with a solo 401(k), I look forward to working with you. If you can help, please let me know, and we’ll get started.
ANSWER: Since you plan to transfer a former employer 401k to a new solo 401k with us that would allow for investing in a private businesses such as a restaurant, and you have confirmed that you are self-employed, it appears that you may be a good candidate for a solo 401k. Nonetheless, make sure to confirm with your personal tax accountant that in fact your income from self-employment is considered earned income and not passive income as the ladder would generally not qualify you for opening a solo 401k. Next, with respect to investing in a restaurant, you may do so if the solo 401k will be passively investing in it. In other words, you cannot be an employee of the restaurant nor be personally compensated from the restaurant as a result of your solo 401k investment in the restaurant.
Alternatively, if you do wish to be an employee, personal owner of the restaurant, you may want to consider exploring the ROBS 401k, a type of 401k arrangement that affords the 401k owner the option to invest his or her retirement funds in a restaurant while also serving as an employee and thus receive a salary.
Lastly, yes our solo 401k allows the participant to borrow/take a solo 401k loan.
JN in Texas