How to Roll a 401K into a Solo 401K?

[Mark Pijanowski]

We are looking to transfer my wife's 401K to a Solo 401K and use the money to invest in real estate. She is no longer employed by her former company. After researching, we understand the differences between the two, but we're looking for a step-by-step process. Do we need to open an LLC? Do we have to go though a financial organization, like sense financial? Thanks in advance!

[Brian Eastman]

@Mark Pijanowski

Firstly, your wife will need to be self-employed in order to sponsor a Solo 401(k) plan. If not, then a self-directed IRA LLC will be a similar option providing investment flexibility and direct checkbook control.

No LLC is required. Your wife's business can be a sole proprietorship, LLC, corporation etc. The business must be an active business producing earned income. The business entity is entirely separate from the retirement plan.

The 401(k) itself is a form of trust.  You will want to work with a professional provider to help you implement the 401k plan trust, establish an appropriate trust-held bank account and then rollover your wife's prior 401(k) funds.  A quality provider will also provide the kind of education and ongoing guidance you need to operate the plan properly within the IRS guidelines.