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What Can You Invest in With a Solo 401(k)?

What can and can't you invest in with a Solo 401(k) retirement plan? Start saving the self employed way with Ubiquity's Single(k)® plan.

  • Invest in a wide range of investment options through a self directed brokerage account at any financial institution of your choice
  • Reduce your taxable income with Traditional or Roth options
  • Get access to funds through a loan option
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I am a sole proprietor

Very few investments are prohibited by the IRS and Department of Labor when you have a tax-advantaged Solo 401(k) plan.

Available to the self-employed, business owners with no full-time regular employees, and their spouses, the Solo 401(k) offers high limits and tremendous freedom of investment. Here we’ll discuss some of the most common types of investments Solo 401(k) participants make, as well as a few prohibitions.

Foreign Currencies

You may use 401(k) funds to buy Iraqi Dinars, Swiss Francs, Canadian Dollars, Australian Dollars, Japanese Yen, and South African Rands – to name a few popular choices. Any gains made on appreciation value are deferred until distribution or negated altogether if you have a Roth 401(k). Foreign currency offers greater liquidity than stock market investments, which is why many people add these investments to their portfolios.

Loans + Notes

Auto, secured debt, unsecured credit card debt, mortgage notes, or student loans may be purchased from third parties. There is some risk that the debtor will not repay the loan, of course, but most debts are repaid at rates of 12-18 percent, making it a potentially high-yielding investment option. This interest would be either tax-deferred or tax-free.

Precious Metals

Using your Solo 401(k) to invest in gold coins and precious metals can exceed inflation rates and provide tax-free gains over the years. You can diversify these highly-liquid investments and choose gold, silver, platinum, palladium, or bullion. You can invest in online coin or store your assets in a U.S. Bank or approved depository, as per IRC 408(m) guidelines.

Private Businesses

Become an angel investor or venture capitalist, try your hand in business, gain greater economic control, and increase your wealth by investing in a privately held business. You can purchase a limited liability company, C Corporation, or partnership – basically any entity other than an S Corporation. You’ll need to be mindful of IRC 4975 limitations, including “disqualified persons” and “prohibited transactions,” but investing in startups, bankrupt firms, or growth industries can earn significant returns.

Real Estate

You can use Solo 401(k) funds to purchase real estate investments (or raw land investments) by simply writing a check from your plan bank account. Foreclosures, rehabs, residential, and commercial real estate are allowed. Many people choose to invest in real estate to enjoy tax-deferred gains until distribution time at age 72. With a Roth Solo 401(k) plan, all gains are tax-free. By contrast, if you used personal funds, the gains would be subject to federal and state income tax.

Stocks, Bonds, CDs, and Mutual Funds

Most investors choose a mix of stocks, bonds, CDs, and mutual funds to diversify their portfolios, reflect personal values and interests, and grow their retirement nest eggs. Though values can rise and fall over time, investments in stable companies generally provide considerable long-term gains. Solo 401(k) investors can leverage growth industries or tailor investments to their individual risk profiles.

Tax Liens

Solo 401(k) plan funds may also be used to purchase tax deeds or liens for tax-deferred AKA traditional 401(k) or tax-free AKA Roth 401(k) gains. Simply write a check – no custodian consent required – to pursue yields well into the double-digits.

Prohibited Investments with a Solo 401(k)

Solo 401(k) participants cannot use retirement funds to invest in:

  • Alcoholic beverages
  • Antiques
  • Artwork
  • Certain coins and metals
  • Gems
  • Musical instruments
  • Rugs

Certain types of transactions are prohibited:

  • You cannot sell your existing property to your Solo 401(k) plan.
  • You cannot use your Solo 401(k)-owned property as security for a loan.
  • You cannot use your Solo 401(k) property for personal use.
  • You cannot loan Solo 401(k) funds to your parents, business, or spouse’s business.

When you set up your Solo 401(k) plan with Ubiquity, we not only manage the growth and compliance of your retirement savings plan, but are also available to answer any of your investment questions. Contact us today and set up a low-cost, high-yield Solo 401(k) in minutes!

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© 2021 Ubiquity Retirement + Savings
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44 Montgomery Street, Suite 3060
San Francisco, CA 94104
Support: 855.401.4357

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© 2021 Ubiquity Retirement + Savings
Privacy Policy
44 Montgomery Street, Suite 3060
San Francisco, CA 94104
Support: 855.401.4357

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