Solo 401k - High Yield Savings Account

7 Replies

Is anyone aware of any Savings Accounts that pay high yield savings (1.6% or more) that allows you to open the account in your Solo 401k Trust EIN?  

I would like to be able to put my money to work in such an account when it is not in an investment.  Cash sitting in my account only earns 0.2% .

Much appreciated

@Richard Howell How long is your liquid cash sitting untouched? I don't know of any account that you are speaking of outside of certificates of deposit that would be at 1+ year terms.

I would continue to invest. I am not sure of your investment strategies, but if you are aware of any flippers in you area you could do some hard money lending backed by the property. You could invest in another REI's syndication if you are a qualified investor and are willing to tie up the money for 3 - 5 years. Those are my best options that I can think of. Hopefully someone smarter than me comments and gives you even more info.

Richard,

You can open account for your Solo 401k trust at any bank or financial institution. However, the difference in interest earned would be minimal, I don't think it's worth your effort trying to find savings account offering highest yield, at the end even account offering highest yield will only result in minimal earnings. Instead you should focus on finding long term investments paying 10+% such as trust deeds, private placements, note funds, syndication, etc. That is how your money can really work for you. 

@Richard Howell

The posts above are all spot on.

I would add two things:

1) The account you open for the Solo 401(K) will be an entity account for the trust.  Many banks offer higher savings rates for individuals, but not for commercial style accounts such as businesses and trusts.   As far as your Solo 401(k) checking account, I would focus on cost/service rather than any type of bank-offered savings.  Solera National Bank in Lakewood, CO is a bank that has decided to specialize in this space of Solo 401(k) accounts and is worth checking out.

2) The Solo 401(k) may open a brokerage trading account with a firm such as Schwab, Fidelity, etc.  You may find a vehicle such as a low cost fund that can be used to keep idle capital, reserves and earnings productive instead of sitting in cash.

From a Solo401k participant I use the Fidelity Brokerage Accounts for long term investing and I keep liquid cash in Goldman & Sachs Savings (1.7%APY). 

I use the G&S accounts (as I have opened several that are viewable on one dashboard) in conjunction with my local bank to move funds about with ease. 

G&S accounts are:

 Our Emergency Fund: 3-6 months of expenses

"Tax Escrow": Set aside our current self-employment tax rate anytime we bring in income and pile it up in here. Earns interest between quarterly estimates.

"General Expense Account": Set aside 4 months minimum of budgeted monthly expenses. As the month rolls over we roll over one month increments to our local checking account.

"Goal Savings": Squirrel extra money here after setting aside taxes and investing in Brokerage Account, and anything beyond the 4 month general expense account to save for "dream purchases"

Basic philosophy is pay yourself/Solo401K tax advantages accounts first (401k Roth IRA and HSA), then self employment taxes. Get the 4 month general expenses where they need to be. After that can allocated money toward whatever else we feel we'd like EVEN investing in a brokerage account outside the 401k.

EXTRA NOTE: We do keep some money "liquid" inside the brokerage account in a Money Market (SPAXX) until we have minimum amount needed to buy shares in our selected funds. We also keep money liquid here so that if the right Real Estate opportunity comes up we can write a check.

Sorry for the overkill on detail but just wanted to share how my family and I use our Solo401k and our High Interest Savings Account to move towards our life goals.

Why do you escrow money in a Solo 401k for self employment tax? There is no self employment tax on a Solo401k. You are not co-mingling taxable money from your business with your retirement account are you?