A Solo 401(k) is the best way for real estate agents and mortgage brokers to save money for retirement.

As a self-employed business owner, you can contribute as both the employer and the employee to a tax-advantaged savings plan. Compared to other retirement accounts, a Solo 401(k) has higher limits, more freedom, and more flexible control.

Solo 401(k)s Offer High Contribution Limits for Real Estate Professionals

In 2023, a realtor, broker, or real estate agent can set aside money as both:

  • Employee – Up to 100% of your earnings to a maximum of $23,000
  • Employer – Up to 25% of your total profits to a maximum of $46,000

If you’re over age 50, you can save an extra $7,500 as a catch-up contribution. Your spouse can also be included in a Solo 401(k) to double your household’s retirement savings. Compared to the $7,000 or $8,000 you could potentially save with an Individual Retirement Account (IRA), a 401(k) allows much greater savings for a successful real estate agent

Solo 401(k)s Offer Your Choice of Tax Advantage - Traditional or Roth

A Solo 401(k) can be:

  • Traditional – Deduct 401(k) contributions from your adjusted gross income on tax forms for the year. Instead, you’ll pay taxes on the amount withdrawn in retirement.
  • Roth – You pay taxes on the money you set aside this year, but pay no taxes upon withdrawal.

If you plan to be in a higher tax bracket in retirement than you are now, then a Roth Solo 401(k) is a good bet.

Many Investment Types Are Possible With Solo 401(k)s

Another advantage of the Solo 401(k) is that you can invest in what you know – real estate! Solo 401(k) investments include the usual stocks, bonds, and mutual funds, but also metals, coins, tax liens, credit card debts, and real estate. There are many rules to abide by if you plan to use retirement plan funds to purchase real estate. Most notably, you can’t buy the house you plan to live in with the tax-advantaged savings. However, you can buy an investment property rented out to people other than your direct relatives.

Solo 401(k)s Come With Full Checkbook Control

Another key advantage of a Solo 401(k) is that you can choose not only how, but when, to invest. Making an investment is as easy as writing a check from your retirement savings bank account. You needn’t form an LLC to exercise such control. Other types of accounts like IRAs may require a custodian, which could potentially delay investments by 14 days.

You don’t need to go to a special bank to open a Solo 401(k). You can start saving by opening an account online with Ubiquity. The process is quick and easy.

Solo 401(k) Funds Are Accessible to Real Estate Professionals

Generally, you should plan on keeping your funds invested until age 59.5 – at which point you can withdraw money without penalty. You aren’t legally required to begin taking distributions until age 72, but you can also roll the funds over into an IRA if you’d rather pass the money onto your heirs than spend it.

However, Solo 401(k)s allow participants to take out loans worth the lesser of 50% or $50,000 – which is a nice lifeline in times of turmoil or if you’d like to invest in real estate tax-free, without custodian consent. You might need to access your funds to cover a medical expense, avoid foreclosure, cover educational expenses, or cover funeral costs.

If you take out money early, you’ll be subject to a 10% penalty, and you’ll have to pay income tax on the withdrawal.

Real Estate Brokers and Agents Can Contact Ubiquity to Start Saving for Retirement

Ubiquity is a low-cost 401(k) plan provider offering plan setup and daily maintenance on Solo 401(k)s for as little as $19/month. While some real estate professionals may opt for a self-directed IRA, you may discover that the Solo 401(k) goes above and beyond to provide even greater benefits. Contact us to learn more.