Solo 401k Checkbook Control: Better Than Checkbook IRA? (2026)
Why self-employed investors increasingly choose Solo 401k over checkbook IRA for retirement real estate and alternative investments.
Key Takeaways
- 1Solo 401k allows $69,000+ contributions vs $7,000 for IRA (2024 limits)
- 2Checkbook control without LLC—plan trust opens checking account directly
- 3Fewer prohibited transaction restrictions than IRA
- 4Can borrow up to $50,000 from Solo 401k (cannot borrow from IRA)
- 5Roth Solo 401k option for tax-free growth
- 6Only for self-employed with no full-time W-2 employees
What Is Solo 401k Checkbook Control?
A Solo 401k with checkbook control gives you direct investment authority without LLC structure:
- Also called "Individual 401k" or "One-participant 401k"
- Designed for self-employed with no full-time employees
- You are trustee of the 401k trust
- Trust opens business checking account directly
- No LLC required (simpler than checkbook IRA)
- Write checks directly from 401k trust account
- Same alternative investment options as SDIRA
- Higher contribution limits than any IRA
Key Difference from Checkbook IRA
Checkbook IRA requires an LLC structure (IRA owns LLC, you manage LLC). Solo 401k doesn't need LLC—you are trustee of the 401k trust and control checking account directly. This saves the annual LLC fees and state filings.
Solo 401k vs Checkbook IRA Comparison
Side-by-side comparison for self-employed investors:
- Solo 401k wins: Higher contributions, no LLC fees, loan option, fewer restrictions
- Checkbook IRA wins: No self-employment income required, easier for W-2 employees
- For self-employed: Solo 401k is usually superior
- For W-2 employees: Checkbook IRA is only option
| Feature | Solo 401k Checkbook | Checkbook IRA |
|---|---|---|
| Contribution limit (2024) | $69,000 ($76,500 if 50+) | $7,000 ($8,000 if 50+) |
| Requires LLC? | No—direct trust checking | Yes—IRA owns LLC |
| Annual state LLC fees | $0 | $50-$800/year |
| Loan provision | Yes—up to $50,000 | No—prohibited |
| Roth option | Yes—Roth Solo 401k | Yes—Roth IRA |
| Prohibited transactions | Fewer restrictions | More restrictions |
| Can invest in own business | Yes (with limits) | No |
| Setup complexity | Moderate | Moderate-High |
| Who qualifies | Self-employed only | Anyone with IRA |
| Asset protection | Unlimited (ERISA) | State-limited for IRA |
Who Qualifies for Solo 401k?
Eligibility requirements for establishing a Solo 401k:
- Self-employment income: Business, freelance, consulting, rental (active), etc.
- No full-time W-2 employees (other than spouse)
- Part-time employees (<1,000 hours/year) are okay
- Can have Solo 401k AND employer 401k (subject to combined limits)
- Any business structure: Sole proprietor, LLC, S-corp, C-corp, partnership
- Even side hustle income qualifies
- Spouse can participate if they have business income
- Can establish mid-year or even December 31st
Example: Who Qualifies
Sarah is a W-2 employee with $100k salary. She also has a side consulting LLC earning $20k/year. She qualifies for Solo 401k based on the $20k self-employment income. She can contribute to both her employer 401k and Solo 401k (combined limit applies).
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Solo 401k Setup Process
How to establish Solo 401k with checkbook control:
- Setup fees: $500-$1,500 one-time
- Annual fees: $125-$500/year (no LLC fees)
- Must file Form 5500 once assets exceed $250k
- Can add Roth option for tax-free growth
- Can establish as late as tax filing deadline + extension
- 1Choose provider: IRA Financial, Rocket Dollar, Solo 401k, MySolo401k ($500-$1,500 setup)
- 2Adopt plan document: Provider creates compliant 401k plan document
- 3Obtain EIN for plan: Separate from business EIN (free from IRS)
- 4Name yourself as trustee: You have signing authority
- 5Open trust checking account: "[Your name] Trustee of [Plan name]"
- 6Fund the plan: Employer contributions and employee deferrals
- 7Begin investing: Direct control via checking account
- 8Annual administration: Form 5500 required once assets exceed $250k
Advantages of Solo 401k Checkbook Control
Why sophisticated self-employed investors choose Solo 401k:
- Massive contributions: $69,000/year vs $7,000 for IRA (2024)
- Catch-up: Additional $7,500 if age 50+ ($76,500 total)
- Mega backdoor Roth: After-tax contributions converted to Roth
- Plan loans: Borrow up to $50,000 or 50% vested balance
- Fewer restrictions: Can invest in business (with limitations)
- No LLC needed: Saves $50-$800/year in state fees
- Superior asset protection: Unlimited ERISA protection
- Roth option: Tax-free growth and withdrawals
- Profit sharing: Maximize contributions based on income
- Simpler structure: No LLC operating agreement or annual filings
Employee Restriction
If you hire even one full-time W-2 employee (working 1,000+ hours/year), you must either terminate the Solo 401k or convert it to a full 401k plan covering employees. Part-time contractors and employees under 1,000 hours don't count. Plan carefully if growing your business.
Gold Investing with Solo 401k
Solo 401k can invest in physical gold and precious metals with same rules as Gold IRA:
- Higher contribution limits mean more capital for gold purchases
- Direct checkbook control allows quick purchases during price dips
- Can allocate to both Roth and Traditional sides
- Same IRS-approved metals and storage requirements as Gold IRA
- Augusta Precious Metals works with Solo 401k investors for gold allocation
Frequently Asked Questions
1Can I convert my checkbook IRA to a Solo 401k?
Yes, if you have self-employment income. You can roll your Traditional IRA into a Solo 401k tax-free (Roth IRA requires taxable conversion). This is often strategic for those with self-employment income who want higher contribution limits and fewer restrictions.
2What if I get a W-2 job after establishing a Solo 401k?
You can keep the Solo 401k, but you can only contribute based on self-employment income. If you participate in your employer's 401k, the $69,000 limit is combined across both plans. You can still manage investments with checkbook control.
3How much can I contribute to Solo 401k?
For 2024: up to $69,000 ($76,500 if 50+). This includes employee deferrals (up to $23,000) plus employer profit sharing (up to 25% of compensation). If you have spouse in business, they can also contribute up to the limit, effectively doubling household contributions.
4Can I have Solo 401k and SEP IRA?
Yes, but it rarely makes sense. Both use the same contribution limit calculation (25% of compensation), so adding SEP IRA doesn't increase total contributions. Solo 401k is better because it allows higher employee deferrals ($23,000 vs $0 for SEP) and offers Roth option.
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