QUESTION 1: When I make my solo 401k participant loan payment with a check from my personal account, is there another procedure I need to do as well? Notify someone?
ANSWER: Because your retirement plan is a self-directed 401k, meaning you are the trustee of the 401k, you are responsible for the activities of the 401k including making sure the solo 401k participant loan payments are made on-time and to the self-directed 401k bank account. The only time you will need to notify anyone is the IRS in the event of a 401k audit. Thus, it is important that you follow the solo 401k participant loan payment schedule and that the solo 401k loan payments are made when due.
QUESTION 2: I am over 59.5 yrs. old now. Am I able to withdraw on my 401K without penalties while I have a loan with my 401K?
ANSWER: Yes since you have reached retirement age. However, the solo 401k distribution rules must be followed including filling out a distribution form each time a distribution is made, paying the mandatory 20% by the 15th of the month following the date of the distribution, and filing the appropriate reporting forms (e.g., 1099-R and form 945). Please click here to read our blog regarding the solo 401k distribution process.
QUESTION 3: Have you heard of investing in HOA (home owners association) liens? If yes,
- Is this an investment that I am able to do with my solo 401K?
- If I am able to do so, I have a partner that would like me to invest with them. With all their RE investments they create an LLC. I was wondering if my 401K can partner with them in an LLC?
ANSWER: I have heard of investors investing their retirement plan assets in HOA liens. The solo 401k could indeed invest in an LLC that subsequently invests in HOA liens. Therefore, the profits would flow to the LLC and eventually to the LLC members (i.e., the solo 401k and the other members).
