We are looking to transfer my wife's 401K to a Solo 401K and use the money to invest in real estate. She is no longer employed by her former company. After researching, we understand the differences between the two, but we're looking for a step-by-step process. Do we need to open an LLC? Do we have to go though a financial organization, like sense financial? Thanks in advance!
Firstly, your wife will need to be self-employed in order to sponsor a Solo 401(k) plan. If not, then a self-directed IRA LLC will be a similar option providing investment flexibility and direct checkbook control.
No LLC is required. Your wife's business can be a sole proprietorship, LLC, corporation etc. The business must be an active business producing earned income. The business entity is entirely separate from the retirement plan.
The 401(k) itself is a form of trust. You will want to work with a professional provider to help you implement the 401k plan trust, establish an appropriate trust-held bank account and then rollover your wife's prior 401(k) funds. A quality provider will also provide the kind of education and ongoing guidance you need to operate the plan properly within the IRS guidelines.
@Brian Eastman gives a good recap of what is needed.
Thank you for your service. If your wife does not have her own company she can always start with a self directed Ira and later transfer everything accept a Roth IRA to the solo 401k. The SDIRA is easier to start with especially if you are overseas and access to professionals is somewhat hindered. I think it is helpful for people to start slow with tax advantaged plans in real estate especially if they do not have a lot real estate experience. I think buy and hold in Fl is a good idea as I am focusing my attention there as well. I will be happy to discuss your personal situation with you and your wife via PM or email or Skype if it will help you.
I also want to thank @Paul Allen for the heads-up.
To open and continue with a solo 401k plan, you must be self-employed and have not full-time, W-2 employees.
Following are good IRS resources:
Thanks so much all around. We appreciate all the great info. We’ll explore options into the SDIRA as my wife isn’t technically self employed, since she works as a teacher currently. However once we get back to the states, we’re looking to get into real estate full time. At that point she’ll be “self employed”. Presumably we can’t stand up a “business”, but I’ll check the resources and see what meets the legal definition of being self employed.
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