QUESTION: My husband & I operate our own real estate agency via an S-corporation with no w-2 employees. We are interested in establishing a Solo 401k so that we can maximize our Solo 401k contributions and invest in real estate. My husband has approximately $250,00 in his former employer 401k plan at Principal. I have $95K in a traditional IRA at Vanguard. Should we set up two Solo 401k plans? Would we pool our funds into a single account?
ANSWER: A married couple who operates their own self-employed business with no w-2 employees is eligible to set up a Solo 401k. In your case, your S-corporation would sponsor a single Solo 401k plan. The IRS refers to Solo 401k plans as one-participant plans. One exception to this one-participant requirement is an owner-only business owned by a husband and wife. While only one plan would be established, each spouse/participant would have his/her own bank checking or brokerage account in the name of the Solo 401k for the benefit of that person. This is no different than if a husband and wife both worked at Apple and participated in Apple’s 401k plan. The husband and wife would not have a joint 401k account with their retirement funds pooled together. Instead, each person would have his/her own separate 401k account.
MORE QUESTIONS Regarding the Solo 401k Checking Accounts
QUESTION & ANSWER 1: My wife and I are 50/50 owners of our LLC. Would there be one checking account for both of us? Or two checking accounts? Each participant will have a separate sub account (checking account) under the one plan.
QUESTION & ANSWER 2: If I am the trustee and die, would my wife become the trustee and have control of the solo 401k money? By law your wife is the primary beneficiary of the solo 401k, unless you designate someone other than your wife as the primary beneficiary in which case your wife would have to formally consent on the beneficiary election form that is provide the with the solo 401k plan establishments documents.