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Can my Solo 401k plan partner with myself?

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I now have my Solo 401k and would like to use the Solo 401k funds to partner with myself on investment. How can I do that? Can I also partner with someone else's IRA or 401k?

  • Your 401k can partner with other non-disqualified individuals or their IRAs
  • Your 401k may also be able to partner with you, but only if it is an arms-length transaction and there is no need for the 401k to partner with you

Such a transaction is known as "enabling" and is prohibited. Enabling means using 401k funds to enable a personal investment, or vice versa. If you are ever audited, you will need to prove that you received no impermissible benefit from your 401k's participation in the investment.

For example, if you don't have enough personally to cover an investment and choose to have your 401k partner with you, that would be considered enabling.

Or, if your 401k does not have enough cash for an investment and you choose to partner with yourself so your personal funds can cover the gap, that would be considered enabling. 

  • In general it is better to separate the 401k investments from your own investments
  • If your 401k partners with you on an investment, it cannot get a non-recourse loan

A non-recourse loan is only possible if the 401k is the only investor or if it invests with other, non-disqualified parties. Once you combine personal funds, leverage is not an option since it is cross-collateralization and is prohibited.

If enabling is not an issue, note the following when partnering on investments:

  • Expenses generated by the property must be paid proportional to ownership

If there is a tax bill, it must be paid by you and your 401k, proportional to ownership percentages. Similarly, any income generated by the property must be split proportionally between you and your 401k. If you don't have a property manager collecting the rent, the tenants will need to write two rent checks each month- one to you and one to your 401k.

  • You and any disqualified parties are prohibited from using the property, living in the property, or making any repairs or doing maintenance or upkeep on the property. You will need to hire outside vendors for these items.
  • You will not be able to obtain financing to acquire this property, it must be paid in cash

Understanding prohibited transactions

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