THE BROAD FINANCIAL SOLO 401K®
FREQUENTLY ASKED QUESTIONS
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How does THE BROAD FINANCIAL SOLO 401K differ from a large corporation’s 401k
plan?
The large corporate 401k plans cover many employees, have extensive administrative
requirements, limit your investment choices and involve steep costs. THE BROAD FINANCIAL
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SOLO 401K is solely for the self-employed individual, requires minimal administration, is low-
cost and enables you to diversify in all traditional and alternative asset classes.
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How does THE BROAD FINANCIAL SOLO 401K compare to those solo 401k plans being
advertised by the large brokerage houses?
A good question – and an important one for you to decide. Those solo 401k plans do not permit
you to diversify outside the stock, mutual fund, bond formula. Which means they are self-
directed only within a narrow range of investments. A costly range, as the 2008 stock market
showed so graphically. With THE BROAD FINANCIAL SOLO 401K™ you can diversify across
the broadest possible spectrum of investments – which increases your potential for both growth
and safety.
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Who is eligible for THE BROAD FINANCIAL SOLO 401K ?
You, if you work for yourself; as owner or partner of an LLC or corporation, acting as a sole
proprietor using your own social security number (therapist, consultant, musician, etc.), as a
partner in a partnership, or as a “1099” employee – and have no full-time employees.
How do you define “full-time employees?”
A full-time employee is generally defined as any person who works for you (or your company)
for 1,000 or more hours a year.
In a large, corporate 401k plan my money would be in a trust account. Where would I
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keep it with my BROAD FINANCIAL SOLO 401K ?
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When you have a BROAD FINANCIAL SOLO 401K Plan, you’ll also have a BROAD
FINANCIAL SOLO 401K® Trust. As the sole Trustee, you will open a bank account at any bank
of your choice, be given a checkbook, and have full discretion over your SOLO 401K Trust’s
assets.
What are the advantages of having this checkbook SOLO 401K?
You‘ll be able to move quickly when an investment comes your way that requires timely action.
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Also you’ll eliminate a lot of transactional costs and red-tape delays that go hand-in-hand with
having an independent custodian involved in the processing of each investment and transaction.
So what are the decisions I’ll be making as the Trustee of my SOLO 401K?
The two, key, self-directed ones:
1. How much money to put into your plan each year.
2. What to invest those funds in – and when.
Can you say a little bit more about “self-directed” investing?
As a self-employed person – entrepreneur – you exercise full control over the management of
your career and business. A self-directed investor is equally active in preparing for retirement.
As a self-directed investor, you’ll invest in what you know and in what you believe.
Self-directed investing also includes collaboration with financial professionals – and others – to
help you formulate your investment choices. BROAD FINANCIAL often recommends working
with a financial planner.
Self-directed investing, by the way, is not new to 401k’s. Since their inception, 401k’s
encouraged diversification of retirement funds across of wide range of investments. It was
because large corporations’ administrative procedures were only geared to handle stocks,
mutual funds and bonds and not “alternative” investments that their employees had to settle for
less diversification.
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What kind of investments can I make with THE BROAD FINANCIAL SOLO 401K ?
Here is a basic, starter list:
Real Estate (e.g. rentals, condos, single family homes, land, retail, office, industrial)
Mortgages
Private loans
Businesses (e.g. a retail store, a construction company, a wind farm, a circus)
Movies, books, songs (or a songwriter)
Private placements
Tax liens
Stocks and mutual funds
Bonds
Gold and Silver U.S. Eagles
Commodities (e.g. lumber, orange juice, soy beans)
Life insurance contracts
Stock in an S-corporation, LLC, partnership, etc.
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Does THE BROAD FINANCIAL SOLO 401K let me invest in anything I want?
No 401k Plan, of any kind, is allowed to purchase “collectibles” (art, stamps, baseball cards,
etc.). In addition, no 401k Plan can invest, do business with, or directly benefit a “disqualified
person.” Such activities are known as “prohibited transactions.”
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Who are “disqualified persons?”
You, for one. Your spouse, for another. Your parents and grandparents, children and
grandchildren (and their spouses), your investment advisors, and any persons who provide any
service to your SOLO 401K.
The logic is this: You cannot use tax-deferred 401K funds – which are destined to provide you
with a future benefit – to bestow a present benefit to you, or any persons closely related to you.
If your SOLO 401K were to engage in certain types of dealings with a disqualified person, it
would be engaging in a “prohibited transaction.”
Could you describe some “prohibited transactions?”
Your SOLO 401K cannot purchase property you own personally. Or property any
member of your immediate family owns.
Your SOLO 401K cannot purchase property from any of your investment advisors, or
any persons who provide a service to your plan.
Your SOLO 401K cannot loan money to a disqualified person.
You cannot occupy, use, rent, or vacation in a property owned by your SOLO 401K.
You cannot receive a salary or fee for managing your SOLO 401K.
Your SOLO 401K cannot do business with any entity in which any disqualified
person owns 50% or more.
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What are my tax-free contribution limits with THE BROAD FINANCIAL SOLO 401K ?
They are: up to $49,000 a year ($54,500 if you are 50 years or older). Double those amounts if
your spouse is in business with you.
Is there ever a scenario, prior to my retirement, where my SOLO 401K will have to pay
any taxes?
Yes. Profits generated by an investment made in an active business (e.g. a retail store,
restaurant, construction company) are subject to Unrelated Business Income Tax (UBIT).
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Does THE BROAD FINANCIAL SOLO 401K allow for a ROTH component?
Yes. You can put up to $16,500 a year ($22,000 if you’re 50 years or older) into your SOLO
401K. Double those amounts if your spouse is in business with you.
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Can I borrow from my BROAD FINANCIAL SOLO 401K Plan?
Yes. You can borrow up to 50% of the total assets of your plan up to a maximum of $50,000.
And you can use the proceeds of that loan for any purpose you choose.
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If I have a regular job but also have some self-employment activity, can I open a BROAD
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FINANCIAL SOLO 401K ?
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Yes. In fact, you can have a BROAD FINANCIAL SOLO 401K , a regular 401k from your
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corporate employer and an ULTIMATE IRA – all at the same time.
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Do I need a custodian to hold my BROAD FINANCIAL SOLO 401K ?
All retirement accounts require a Custodian or Trustee. Our SOLO 401K appoints you as the
Trustee to self-direct and self-administer your SOLO 401K plan. Therefore no separate
custodian is necessary.
Speaking of self-direction, didn’t I already have investment control before with my
retirement accounts?
On paper, yes. In practice, no. Even though the original IRA or 401K regulations have always
permitted investments in areas other than stocks, bonds and mutual funds – real estate as one
example – the big banks and brokerage houses which had a natural monopoly in the field for
years didn’t offer alternative investments to their retirement account clients. And still do not. It’s
a pity.
Does BROAD FINANCIAL offer other self-directed, individual retirement accounts?
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Yes. THE ULTIMATE IRA which is an upgraded IRA and also permits self-direction with
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checkbook-convenience. THE BROAD FINANCIAL SOLO 401K , however, was designed
specifically for self-employed persons.
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Is it possible for a person to set up both a BROAD FINANCIAL SOLO 401K and an
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ULTIMATE IRA ?
Yes. Provided you meet the eligibility requirements of the SOLO 401K.
What types of retirement accounts can roll-over into THE BROAD FINANCIAL SOLO
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401K ?
Traditional IRA’s
Corporate 401(k)’s
SEP IRA’s
403(b)’s
Keoghs – and many other pension and profit-sharing plans.
Special note: Most corporate 401k plans will only allow you to roll-over funds into a new
retirement account when your employment with them ceases. Some employers permit you
to roll-over a portion of your account’s funds while still employed. If this form of roll-over is
what you are intending to execute you need to contact your current 401k provider to clarify
their roll-over policy.
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