Set up a Solo 401k | Presence of Self-Employment | IRS Solo 401k Rules


I have a few questions surrounding your Solo 401k. I am busy at work so calling during the day is not an option. I have the following questions:

QUESTION: 1) If I set up a solo 401k, do you hold the money or can the money stay in a third party bank?

ANSWER: We don’t hold Solo 401k investors funds or investments. Instead, after you set up a Solo 401k, the Solo 401k funds are held in the Solo 401k bank account and you decide on the bank. The documents associated with the Solo 401k alternative investments are safe kept by you as the named solo 401k trustee. For example, the recorded deed if the Solo 401k invests in real estate.

QUESTION: 2) If I only earn $10,500 in real estate profits, does that mean my maximum employer contribution for my single member LLC is only $2,625? I don’t exactly earn a wage so much as rental income, and with property management fees I net $875/month in revenue.

ANSWER:  One of the main Solo 401k IRS rules entails qualifying to set up a Solo 401k, which entails the following:

  • The presence of self-employment income, and
  • Having no full-time employees, defined as those, besides the business owner and his or her business partner and/or spouse, working more than 1,000 hours per year.

Therefore, make sure you are performing services that lead to your self-employment income as income from passive investing generally does not qualify as income for setting up a Solo 401k plan.

QUESTION: I see that there is a maximum of up to 49k to be contributed to a Solo 401k plan, but I would like to know the limit before opening an account.

ANSWER: The annual Solo 401k contribution limits vary from year-to-year, but for tax year 2013, the maximum allowable Solo 401k contribution is $51,000 plus $5,500 if you are age 50 or older in 2013.



About Mark Nolan

Each day I speak with energetic entrepreneurs looking to take the plunge into a new venture and small business owners eager to take control of their retirement savings. I am passionate about helping others find their financial independence. Having worked for over 20 years with some of the top retirement account custodian and insurance companies I have a deep and extensive knowledge of the complexities of self-directed 401ks and IRAs as well as retirement plan regulations. Learn more about Mark Nolan and My Solo 401k Financial >>


  • Popular Video

  • ROBS 401k Funding Process

  • Solo 401k Contributions Including Mega

  • Checkbook IRA LLC

  • About MySolo401k

    We help our clients take control of their retirement money. Our products and services provide our clients the freedom to invest their retirement savings in their own business as well as alternative investments such as real estate, private companies, promissory notes, precious metals, tax liens and equities.
    Learn more

    Connect with us

  • We’re here to help.

    Call: 800-489-7571


    8:00 am - 4:00 pm PT

    Why us?