QUESTION 1:
I have both a rollover IRA from a previous employer and a SEP IRA. Can I combine these into a solo 401K?
ANSWER:
Presumably you are self-employed if you are already participating in a SEP IRA, but to clarify, here is how the IRS defines self-employment:
- You carry on a trade or business as a sole proprietor or an independent contractor.
- You are a member of a partnership that carries on a trade or business.
- You are otherwise in business for yourself (including a part-time business)
Yes the IRS rollover rules permit the transfer of SEP IRAs and Rollover IRAs to a self-employed 401k such as a solo 401k plan.
To see a full list of retirement account types that may be transferred to a solo 401k plan click here.
QUESTION 2:
Also, is it possible to purchase real estate using a non-recourse loan plus a down payment from the solo 401k?
ANSWER:
Yes a solo 401k may incorporate non-recourse loan financing when investing in real estate, whether for domestic or international real estate.
Some of the rules that apply when using debt financing in conjunction with a self-directed 401k to invest in real estate properties include the following:
- The non-recourse loan is to the solo 401k, not the solo 401k owner/participant;
- the lender, whether a bank or an individual, can only look to the property for repayment in the event of non-recourse loan default, not any other asset of the solo 401k; and
- The non-recourse loan does not show up on the solo 401k trustee’s credit report.
Visit solo 401k non-recourse loan for a full breakdown of the rules, and visit solo 401k real-estate purchase methods to learn about others ways to invest a self-directed solo 401k into real estate.
