Solo 401k Loan Available to Each Participant

Besides being the retirement plan of choice for the self-employed for investing in alternative investments such as precious metals, real estate, tax liens, startup companies, promissory notes, etc.,  Self-Directed Solo 401k is also popular for those looking to take a Solo 401k loan, especially since each Solo 401k participant can borrow the maximum limit.

Solo 401k Loan Provider

Provided the Solo 401k provider that you decided to open Solo 401k with drafted Solo 401k documents that allow for Solo 401k loan, the Solo 401k loan rules permit each Solo 401k participant to borrow up to 50% of their total account value not to exceed $50,000, with the minimum loan amount being $1,000.

Solo 401k Loan Example

For example, John and Jane are the only partners in the Jane & John Law Firm LLP and have opened a self-directed Solo 401k with a Solo 401k provider whose Solo 401k document allows for solo 401k loans. Further, John and Jane next rollover their respective IRAs from Fidelity to their newly established self-directed Solo 401k plan and each deposit their IRA to into their separate Solo 401k checking account because the rules call for each participant to segregate their Solo 401k funds including rollovers and contributions. After the rollovers are processed, they each have balance of $200,000 in their Solo 401k plan. This means that based on the Solo 401k loan rules, they can each borrow $50,000 from their Solo 401k.

Note however that if their respective Solo 401k sub accounts were each worth $60,000, for example, they could only each borrow up to $30,000 since the 50% rule applies.

Additional Information

Visit Solo 401k Loan Facts to learn more about Solo 401k loan, including the payment methods, interest rate and required loan documents.

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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