Contributing Assets to a Solo 401(k)

By Jordan Sheppherd

Asset Growth

Because most people are used to contributing cash to a retirement account, it’s easy to think that cash and only cash can be contributed. For an IRA this is certainly true, but not for a Solo 401(k).

For those of you with a Solo 401(k), or those of you who are thinking of setting one up, try this on for size.

The profit-sharing side of a Solo 401(k) (if properly structured) can accept cash or assets as a contribution. If you want to contribute an asset, so long as the asset is unencumbered, and so long as a third party valuation is done on the asset, that asset can be placed into the Solo 401(k) to satisfy the profit-sharing contribution.

Where would this make sense? Any asset that isn’t worth much right now, but will be in the future, like a piece of intellectual property, a patent, or even an option on a piece of property, can be put in the 401(k) at its lower value. When the asset appreciates, you get to capture those profits in a tax-deferred environment.


Don’t forget that the Solo 401(k) also has a Roth component; tax-free is always better than tax-deferred. Why not convert that asset over to the Roth side of the 401(k), so that the profits are captured in the Roth 401(k) and never taxed?

Have an asset whose value is larger than your profit-sharing contribution? No big deal, there’s a way to deal with that as well.

If you have a Solo 401(k) now, or if you’re thinking of setting one up, and you think you may have an asset you’d like to get into the plan, give us a call and we can help.

In the meantime, invest intelligently. Enjoy the rewards.

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