Solo 401k in Wall Street Journal Again

Solo 401k was thrust in the spotlight again last week because of its powerful ability to reduce your self-employment income through large tax-deductible contributions.

Unfortunately, the writer of that WSJ article is mildly financially retarded. Take a look for yourself. Read the article to hear about the powerful tax benefits (albeit presented in a fantasy situation), and then read the comments to have some real people bring the concept back to reality.

The Most Elusive & Dangerous Self-Directed Solo 401k Practice – Part 2

[Originally Published at JeffNabers.com]

In the last post, you learned about how doing an active “entrepreneurship-ish” deal inside your Solo 401(k) is an open invitation for the IRS to tax the hell out of you.

In this post, you’ll learn the solution.

  • The solution is not to avoid doing active deals.
  • The solution is not to stop pursuing massive profits or to lock away your talents and skill to be unused.

The solution is to structure both your active entrepreneurship and your passive investment activity in a way that that puts you in the most control. Put another way, avoid giving the IRS an open invitation to tax attack you.

I bet you can guess where this is going (one commenter had a pretty good [Read more...]

The Most Elusive & Dangerous Self-Directed Solo 401k Practice

[Originally published at JeffNabers.com.]

There’s something that most “successful” Self-Directed Solo 401(k) investors do that can spin them out of control and get them into trouble.

I say “successful” in quotation marks because I’m talking about the particular kind of Self-Directed Solo 401(k) success that is sexy enough to be frequently written about.

What is this dirty deed that leads to massive profits and the potential implosion the very same Self-Directed Solo 401(k) that got those profits?

Entrepreneurship.

Bad Entrepreneur!

Yep. Entrepreneurship is so powerful that it seems to be the source of all aggressive wealth creation. So where’s the danger?

Let me explain. Some of the most [initially] profitable Self-Directed Solo 401(k) stories sounds something like this…

Joe, a Self-Directed Solo 401(k) investor, knows how to work real estate deals into profits. So he buys and sells real estate in his Self-Directed Solo 401(k). Sometimes he involves bank financing. Sometimes he involves private financing and partnering.

But one thing is for sure: Once Joe purchases a property, the work has just begun. He has a system. He only buys properties that meet a certain criteria. After the closing, he usually has repairs and/or remodeling work done.

And his system works. He’ll put $30k or $40k of his Self-Directed Solo 401(k) money into a deal and get $80k to $100k out, often less than a year or two later.

First, applaud Joe for [Read more...]