What is a Self-Directed Solo 401(k) and its structure?
At Rocket Dollar, you can open a Solo 401(k) account. You will manage your own investments and have the ability to invest beyond stocks and bonds with high contribution limits.
Definition: A Solo 401(k) is a retirement plan for business owners who have no other full-time employees other than the owner and, if married, their spouse. A Self-Directed Solo 401(k) plan is ideal for those who generate self-employed income and are interested in generous contribution limits that can grow tax-deferred. Those with an S-Corp can open a SEP-IRA at Rocket Dollar.
For annual contribution limits, please see our contribution article.
Compared to an IRA, the annual contribution limit of a Self-Directed Solo 401(k) is significantly higher.
You can also take out loans from a Solo 401(k) and pay back your retirement plan. These loans come out as unrestricted cash, not retirement dollars, and thus do not have any restrictions on prohibited transactions or prohibited investments.
The Self-Directed Solo 401(k) Structure
A Self-Directed Solo 401(k) has several key components:
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Plan Document – This is the legal framework of your 401(k), outlining plan rules, eligibility, and investment options.
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EIN (Employer Identification Number) – The plan operates under its own EIN, separate from your SSN or business EIN.
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Plan Trust – Your Solo 401(k) assets are held in a trust under your control as the plan trustee.
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Bank or Brokerage Account – The plan’s trust opens a checking or investment account. You direct where funds go, whether that’s buying stocks, wiring funds for real estate, or investing in private deals.
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Recordkeeping & Compliance – As plan trustee, you are responsible for maintaining records, tracking contributions, and filing Form 5500-EZ if your plan exceeds $250,000 in assets.