Harvard Law Attorney George Blower reviews whether gains on Solo 401k investments count towards Solo 401k contribution limits.

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The solo 401k plan, commonly referred to as self-directed Solo 41k is the retirement plan of choice for self-employed individuals or owner-only businesses including for the features highlighted below:

-The highest contribution limits for any defined contribution plan including up to $66,000 (or even $73,500 if you are 50 or older) for 2023.

-The ability to make pre-tax, Roth, and even Mega Backdoor Roth contributions.

-401k participant loans of up to $50,000

-Invest with checkbook control in real estate, cryptocurrencies, notes, private placements, and other types of alternative investments.

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For over 10 years, My Solo 401k Financial is the leading self-directed solo 401k provider having helped over 8,000 clients take control over their retirement funds by focusing on superior knowledge, expertise, and customer service with over 100+ 5-star verified customer reviews on the Better Business Bureau (BBB)….(read more)

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Solo 401k Contributions FAQ: Do Solo 401k contribution limits apply to Solo 401k Investment Gains?

When it comes to retirement planning, the Solo 401k is a popular choice for self-employed individuals. This retirement account allows small business owners and independent contractors to save for their golden years while also benefiting from tax advantages. However, understanding the rules and limitations of Solo 401k contributions can be confusing, especially when it comes to investment gains.

One common question that arises is whether Solo 401k contribution limits apply to Solo 401k investment gains. In other words, if you make contributions to your Solo 401k account, are you allowed to continue growing those funds through investment gains without exceeding the annual contribution limits set by the IRS?

The short answer is yes, Solo 401k contribution limits apply only to the amount of money you can contribute to your account each year. Once the money is inside the account, it can grow tax-deferred through investments such as stocks, bonds, mutual funds, and real estate without any impact on your contribution limits.

It’s important to note that the contribution limits for Solo 401k accounts for 2021 are $58,000 for individuals under 50 years old and $64,500 for individuals aged 50 and above. This includes both employee and employer contributions. The employer contribution limit is set at 25% of compensation for sole proprietors and 20% of compensation for individuals operating their business as an S corporation or partnership.

So, regardless of how much your investments grow inside your Solo 401k account, as long as you stay within the contribution limits, you won’t face any additional taxes or penalties.

However, it’s essential to monitor your contributions and investment gains carefully to ensure that you remain compliant with IRS regulations. It’s recommended that you work with a financial advisor or tax professional to help you navigate the rules and stay updated on any changes to contribution limits or other regulations.

In conclusion, Solo 401k contribution limits do not apply to Solo 401k investment gains. As long as you adhere to the annual contribution limits set by the IRS, you can continue to grow your retirement savings through investments without any impact on those limits. Remember to seek professional guidance to ensure that you are maximizing the benefits of your Solo 401k account while staying compliant with the relevant regulations.