Does it make sense to borrow from a solo 401k (in today's environment) to fund a taxable trading account that employs an options strategy no solo 401k, that I know of, allows? I can grind out 8 or 9% percent a year writing options, and if I am borrowing at say at 6% and the interest goes back into my 401k, where am I losing over the five years of the 50,000K loan, especially if the solo 401k has been underperforming?
Writing options always comes with a lot of risk. Why do you think your 401K disallows it? Because shit happens, that's why. And why would you bother when you can get over 5% with T-Bills?
%% THAT + IRS regs are not anywhere near my favorite. But looks like they were designed not to encourage lending yourself money. [MM pays more than that gov / last i looked.] JUST because my RE broker did not use title insurance, for investments , so i did not. any loss would been unwise. So even a permited deal may not turn out right. SINCE brokers make money on so much stuff\ a disallow could be wise warning. I would find a way to do better than underperform. SPY averages 12%, depending on start date. Actually one ETF sector i like\ tends to underperform\ so i do that smallest ,so no problem
A couple of things...Are you fully funding your 401k? With the company match, it can be easy money that you don't even see. I know you are limited with the choices of investments, but find the one (or two) that you think will be winners. Example, go from a money market fund to an index fund, at the end of a recession. As soon as you leave your job, move your 401k to an IRA...More options you can write. But beware...Know when your start date of work was/is. Try and leave AFTER 5 years (most companies)...To be fully vested. What you think is your start date vs the company, may be two different dates!! Three times I left a company after 5 years. I got fully vested in them all. Also, if there are stock options...Know when they happen. If home/townhouse/condo prices drop and you want to enter that market, some people will use their borrowed 401k for the down payment. Ask trusted/smart friends what you might do...They may show you things (blind spots) you might not see.
geez... The thread title is... Borrowing from a solo 401k -------------------------------------------------------------------------- The one-participant 401(k) plan isn't a new type of 401(k) plan. It's a traditional 401(k) plan covering a business owner with no employees, or that person and his or her spouse. These plans have the same rules and requirements as any other 401(k) plan. https://www.irs.gov/retirement-plans/one-participant-401k-plans Retirement plans may offer loans to participants, but a plan sponsor is not required to include loan provisions in its plan. Profit-sharing, money purchase, 401(k), 403(b) and 457(b) plans may offer loans. To determine if a plan offers loans, check with the plan sponsor or the Summary Plan Description. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-loans
You are right he/she did say solo... I looked at some of his/her earlier threads from a few years back. This thread made me think he was new to investing... https://www.elitetrader.com/et/threads/vix-futures-question.353789/ They could be a professional (highly educated), but not knowledgeable about basic options at the time...