Solo 401k/IRA Money to Exercise Stock Options

BACKGROUND:

I have recently left a job and need to exercise stock options by June 12th.  My husband and I would like to combine the $ from my 401k ($79k) with $ from his rollover IRA ($46k) and use the combined amount to exercise the stock options.  From what I understand so far, a solo 401k or a self-directed IRA LLC may be a mechanism for doing this.

ANSWER:

Both the solo 401k and the IRA regulations do not allow for the use of retirement funds to invest in stock options for your employer or stock options that you already own and would like to exercise. Doing so would result in a prohibited transaction subjecting the IRA or the solo 401k plan to disqualification and taxes.

To learn more about the prohibited transaction rules, please see the following. https://www.mysolo401k.net/solo-401k/prohibited-transactions-solo-401k/

The prohibited transaction rules are found both in the Internal Revenue Code (IRC) and in ERISA.

  • Click here to learn about prohibited transactions under ERISA.
  • To learn about prohibited transactions under Internal Revenue Code click here.

 

 

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 >>

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