QUESTIONS: Thanks so much for all of this info. Ben and I are are still figuring out the best way to fund our business with retirement funds and I would like some more information from you regarding the potential of a Loan from a Solo 401(k). What is the typical time frame to have cash in hand? What other information can you provide? We would be looking at ~ $50k. If I currently have a combo of cash and stocks held in my Rollover IRA at Citi, would I need to liquidate some or all of the securities at Citi, or could we transfer the account to Fidelity or Schwab and then liquidate what we needed to get to $50k in cash?
ANSWERS: You first have to qualify to open a
solo 401k, which means:
1) you need to be self-employed at least on a part-time
basis, and
2) have no full-time employees at the time the solo 401k is opened and
going forward.
Once you hire full-time employee, the solo 401k must be
converted to a full-time employer 401k and offered to the full-time employees.
After the solo
401k is established and funded, the 401k participant loan rules allow each
business owner (provided they are both performing services for the
self-employed business) to borrow 50% of their respective individual account balance
not to exceed $50,000.
The solo
401k can be funded with funds transferred from other retirement plans and/or
IRAs (note that the rules do not permit the transfer of Roth IRA funds to a
401k including a solo 401k). It is best
to transfer liquid funds to the solo 401k instead of stocks or mutual funds especially
if you want to timely process a solo 401k loan.
It generally
takes 1 to 2 weeks to open, fund and process the solo 401k loan.
The following links provide more information on the solo 401k rules. I would be happy to call you to discuss further if you would like.
