Borrowing from Your Plan

Borrowing From Your Solo 401(k)

Another real advantage of the Solo 401(k) over an IRA is the ability to borrow money from your 401(k), personally. Not an investment, you know, obviously you can do that. You’re the plan administrator; you can invest in anything but life insurance and collectibles. But if you need money, personally, maybe you want to fix up the house or you need a little money for a while for your child’s education, you don’t have to work with a Solo 401(k). You can borrow, according to the law, up to half of your 401(k) to a maximum of $50,000. So if you have 40 grand in there, you can borrow 20. If you have $100,000 in there, you can borrow 50. If you have $200,000 in there, you can only borrow 50. Now, if you and your spouse happen to be set up and we do your plan document, then we can structure it to where you and your spouse can each borrow up to that so, actually, you and your spouse can borrow up to $100,000, personally, out of your retirement. And, you know, sometimes this is a great way to make money for your retirement if you have some real high credit card bills, for example. Borrow that money out, pay that debt down, and then, over a period of time, you know, make the payments back to the 401(k). I might as well pay them the high interest than my credit cards. So there’s lots of different ways that the personal borrowing clause will work and we always put that in our plans.