Thinking of Choosing a Solo 401K Plan – Can You Borrow from the Same?
One of the major perks of opting for a solo 401K plan is the ability to borrow from it. As a competent employer, the solo 401K helps you with a participant loan similar to a bigger employer 401K plan. If you are a self-employed businessman, capital access could be a game-changer for you provided you use the plan intelligently. Choose to use your retirement funds to expand your company.
According to an article published in Huffington Post, even if you’re a couple running a small business jointly, you are eligible for a solo 401K. Read on to learn more if you want to take a loan.
You’re in charge of the plan
One of the best things about a self-engaged solo 401 plan is that you take charge of the entire process. You will not need the approval of a third party or shell out any fees for a person to manage the loan. You’re both the controller and trustee of the plan and so, it is your responsibility to cope with the plan together with the loan. You will have nothing to worry provided you manage all paperwork in the right way when it comes to the loan. You also show all payments were made as per the schedule.
When you opt for a loan under this plan, you need to fill out a couple of forms and next issue funds from the 401k, all by yourself. All you need to do is make regular payments quarterly or monthly until you can repay the loan amount.
Funding your company
Using a solo 401k loan is the easiest and most affordable to add more funds to your venture when the capital requirements are comparatively low. If you want to set up your new business or expand it or want to acquire some office equipment to make your firm more productive, you can take a loan from a 401K plan. You will need to pay some kind of interest to your retirement plan. The process is much easier than borrowing from a bank.
When you have access to the additional fund could be the difference that lets you take the big step and be your boss, thus taking your new business to another level. You can read more about loan options and benefits on solo401k.com.
When your funding requirements are more than the $50,000 limit, you can use the solo 401K loan and might like to use the Business Funding IRA.
The loan uses
Using your retirement savings with a loan is practical if you reap maximum benefits by utilizing the funds. This is not a great choice if you want to take a loan to purchase a car or pay for the expenses related to your child’s marriage. Here are some valid reasons people take a solo 401K loan:
- Funding to set up a startup
- For growing the capital of a business
- To buy new business equipment
- Repaying high-cost debts
You can of course take a loan from your solo 401K but for the right reasons. Avoid borrowing money for reasons like buying new furniture or a car.