Solo 401(k) with Checkbook Control

A Solo 401(k) with checkbook control is a powerful retirement plan designed specifically for self-employed individuals and small business owners with no full-time employees. By combining the benefits of a Solo 401(k) with checkbook control, investors gain the ability to directly manage retirement funds through a dedicated LLC or trust. This structure allows investors to write checks or make investments from the retirement account without needing third-party approval for each transaction.

Solo 401(k) -vs- Self Directed IRA

Eligibility

Solo 401(k)s are designed for self-employed individuals or business owners with no full-time employees (other than a spouse). This makes them ideal for sole proprietors, freelancers, and small partnerships. SDIRAs, however, are available to anyone with earned income, offering broader accessibility. Additionally, Solo 401(k)s allow for Roth contributions and loan options (up to $50,000 or 50% of the account balance), which SDIRAs do not. If you value flexibility and higher contribution limits, a Solo 401(k) may be the better choice.

Tax Requirements

Both SDIRAs and Solo 401(k)s offer tax advantaged growth of retirement funds. SDIRAs do, however, have the potential to incur a taxable event, most typically when purchasing real estate with debt leverage. This tax is known as UBIT, or Unrelated Business Income Tax. Solo 401(k)s, on the other hand, are generally exempt from UBIT, potentially making the purchase of real estate using debt finance more convenient.

Contribution Limits

One of the most significant differences between a Solo 401(k) and an SDIRA is the contribution limit. For 2025, a Solo 401(k) allows contributions of up to $69,000 (or $76,500 if you’re 50 or older) as both the employee and employer. This includes employee deferrals and employer profit-sharing contributions, making it ideal for high earners. In contrast, an SDIRA has a much lower contribution limit of $7,000 (or $8,000 if you’re 50 or older) for traditional and Roth IRAs.

Accounting Responsibility

With an SDIRA, investors rely on the custodian to handle much of the accounting, including transaction approvals and IRS reporting, though they must ensure compliance with prohibited transaction rules. In a Solo 401(k), investors act as trustees, taking full responsibility for accounting, record-keeping, and IRS compliance, which offers greater control but requires diligent management of contributions, distributions, and investments to avoid penalties.