Investing in Gold Through a Solo 401(k)

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If you are a small business owner with a Solo 401(k) — also known as a Self Employed 401(k), One-Participant 401(k), Uni-k or Individual 401(k) — and you are curious about whether or not adding gold is the right move for you, you have come to the right place. Adding precious metals bullion is a great way to diversify your retirement portfolio and provide a hedge against economic troubles and currency devaluation.

On this page, we'll go over what a Solo 401(k) is, how it compares to other tax-advantaged retirement vehicles, the benefits of adding gold to your retirement portfolio, and how to get started if you are ready to take advantage of what gold has to offer.

What is a Solo 401(k) Plan?

As the IRS website states, a Solo 401(k) is not a different type of 401(k) plan in terms of functionality. Instead, a Solo 401(k) allows a business owner (and his/her spouse) with no other employees to still participate in a tax-deferred 401(k) plan. Introduced as part of the Economic Growth and Tax Relief Reconciliation Act of 2001, these were the first employer-sponsored retirement vehicles specifically designed for self employed workers, who had previously been relegated to using Profit Sharing Plans, Keogh Plans, or Individual Retirement Accounts (IRAs).

Solo 401(k) plans have almost all of the same rules and requirements of normal 401(k) plans, with two very notable exceptions: first, the employer/owner and his business are not subject to the complex and costly guidelines of the Employee Retirement Income Security Act (ERISA). Second, there can be no other employees of the company who are considered full-time (1,000+ hours worked per year).

Contributions are a little unique with Solo 401(k) plans, since the only account owner is considered to be the employer and the employee. This means that, for tax year 2024, “employee” contributions can only reach $23,000 ($30,500 for 50+ year olds) per year. Additional contributions must be considered “employer” contributions.

Solo 401(k) plans are not required to use a special custodian like an IRA, meaning that almost any bank or financial institution can act as a trustee. If a Solo 401(k) owner finds the right institution to allow it, the plan can invest in a host of alternative asset classes, including real estate or precious metals. Under certain circumstances, Solo 401(k) plans can even invest in life insurance, something even self-directed IRA plans cannot do.

When used properly, Solo 401(k)s are almost unmatched in their ability to offer a retirement plan that is low fee, high flexibility, easy to transact in, has high contribution limits. There are two major drawbacks to a Solo 401(k): they are not available to most workers, and they require an immense amount of paperwork and document maintenance compared to many other plans.

Solo 401(k) Plan Rollover Rules & Limitations

Solo 401(k) can both accept rollovers from IRAs (and other accounts) and be rolled over or transferred into some other types of retirement accounts. Not all plans accept rollovers, however, and even some Solo 401(k)s are created to not allow for rollovers. This is why the plan set-up process is very important for any business owner.

There are no tax penalties for completing a rollover within IRS guidelines:

  • After executing a Solo 401(k) rollover, you have no more than 60 days to finalize the process. Failing this, your withdrawn funding will be considered taxable in the eyes of Uncle Sam and you'll also be on the hook for early withdrawal penalties if you're under the age of 59 1/2 years.
  • You're allowed a maximum of one rollover (IRA-to-IRA, IRA-to-401(k), etc.) per calendar year (365 days), starting on the date you receive your distributed funds and it applies to separately to every IRA owned in your name.
  • In the period between receiving the distribution and setting up your IRA, you are prohibited from using the distributed funds to purchase investment assets. You must wiat until the distribution is in your account before you start investing.

Just like with a standard 401(k), it is advisable to only select a “direct rollover” for your retirement account funds. In the case of a direct rollover, the money never enters your hands. Instead, the funds are sent straight to the receiving account itself and, therefore, the margin for human error is much lower. Direct rollovers are often considered safer and more efficient than indirect ones.

Solo 401(k) Plan vs. 401(k) vs. IRA vs. Other Retirement Accounts

This table posted below depicts the various ways that a Solo 401(k) plan measures up against other tax-advantaged retirement accounts.

Plan TypeSponsorship2024 Contribution LimitRoth Option?Allow Gold Stocks?Allow Gold ETFs?Allow Gold Bullion
401(k)Private Employer$23,000YesMaybeMaybeNo
Solo 401(k)Self-employed$69,000YesYesYesYes
Keogh PlanSelf-employed or Unincorporated EmployerDepends on Type of PlanNoMaybeMaybeNo
403(b)Government or Non-profit Employer$23,000YesMaybeMaybeNo
457(b)Government or Tax-exempt Employer$23,000YesMaybeMaybeNo
SIMPLE IRAPrivate Employer$16,000YesYesYesMaybe
SEP IRABusiness Owners & Self-employed$69,000 or 25% of CompensationYesYesYesMaybe
Profit Sharing PlanPrivate Employer$69,000 or 100% of CompensationNoMaybeNoNo
Money Purchase PlanPrivate Employer$69,000 or 25% of CompensationNoMaybeMaybeNo
ESOPPrivate EmployerVariesYesMaybeNoNo
SARSEPPrivate Employer$69,000 or 25% of CompensationNoYesYesMaybe
Traditional IRAIndividual$7,000 / $8,000YesYesYesNo
Precious Metals IRAIndividual$7,000 / $8,000YesYesYesYes
Thrift Savings Plan (TSP)Government or Military$23,000 + $7,500 Catch-up ContributionYesNoNoNo
"Maybe" indicates that gold investment options are at the discretion of the plan provider. For instance, some 401(k)s offer gold mutual funds or ETFs, while others do not.

Types of Precious Metals Eligible For Inclusion in a Solo 401(k) Plan

If you are selecting a financial institution to use as your trustee for a Solo 401(k) plan, it is very important to understand which investments they are willing to direct your contribution funds into. The limitations placed on you by your trustee will be very significant in determining which types of gold you will have access to.

In theory, Solo 401(k) plans are eligible to invest in:

  • individual stocks
  • individual bonds (corporate and government)
  • certificates of deposit (CDs)
  • mutual funds
  • exchange-traded funds (ETFs)
  • life insurance
  • real estate
  • S corporations
  • precious metals

You can invest in gold bullion through a Solo 401(k) plan, along with many other alternative assets. However, many trustees are not equipped or willing to complete investment metal transactions. If you have a Solo 401(k) and do not have a trustee who can complete a precious metals purchase, you are best served to either roll over into a self-directed IRA or open a separate one.

Investing in Physical Gold (Bullion) vs. ‘Paper Gold'

When you buy physical precious metals, you own the asset. The metal bars are kept in a safe and secure storage site and they can be retrieved at any point by the account holder. There is no counterparty risk, and you are the sole possessor of the property.

However, it's possible to gain indirect ownership of gold (i.e., exposure to the gold market) by buying individual stocks in gold, silver, or platinum mining companies. These stocks are listed on exchanges like the TSX or NASDAQ and include such companies as Newmont and AngloGold Ashanti.

There are also gold ETFs and mining index funds that provide more diverse exposure to the underlying asset, such as the Gold Miners Index (GDX) or the BUGS Index (HUI).

Bear in mind that gold stocks are riskier than owning physical gold. As liquid assets, they can be quickly bought and sold at the turn of a time. For this reason, they are more volatile and have more erratic price swings than physical gold. But that's not the only type of risk associated with this asset type. With paper gold, you also have to consider:

  • Regulatory Risk – companies involved in mining and exploration are subject to very strict state oversight and regulatory scrutiny
  • Cost of Production Risk – mining and exploring is expensive and capital intensive; equipment often breaks down and can result in significant expenses for the company
  • Management Risk – there's always the risk that the company will inherit new management that is incompetent, or will be bought out to a new ownership team that will mismanage their assets
  • Fiat Currency Risk – since paper gold is purchased with fiat currency, you run the risk of buying or selling the securities with a medium of exchange that can diminish in value due to inflation, hyperinflation, or a currency crash.

Consider the fact that gold, in its millennia-long history, has never hit zero or even come close to losing its value. As a safe store of value, you simply do not have to worry about the above forms of risk when investing in physical gold.

Why Roll Over a Solo 401(k) Plan into a Precious Metals IRA?

A Solo 401(k) can provide you with myriad benefits for your retirement. However, they come with many strings attached that you have to carefully navigate unless you want to trigger a penalty or fee. By contrast, a self-directed IRA is much more liberalized and always account owners to do as they please with their retirement savings.

If you cannot invest in IRS-approved gold bullion in your Solo 401(k), then rolling over your funds into a new precious metals IRA can resolve your issue. A rollover is tax-free and allows for far greater freedom regarding the types of assets you can invest in.

Why Dedicate 5-20% of your Retirement to Precious Metals?

Investing in gold is an easy and secure way of protecting your retirement savings. Since they generally resist knee-jerk reactions in the market, gold, silver, and platinum enjoy low volatility and do not carry counterparty or inflation risk like traditional assets.

Protection isn't the only reason to get on board with precious metals. These days, more and more investors are getting on board with gold and silver for their growth potential. After gold broke all-time highs in the summer of 2020, investors are looking to store more of their wealth in the yellow metal to grow their savings while also shielding their wealth from volatility.

It's less a question of whether you should invest in precious metals, and more a question of how much you should invest. The percentage of your portfolio allocated to metals should depend on your age and tolerance for risk. If you're within a decade of your retirement date, you should consider dedicating a greater portion (i.e. 10-20%) of your wealth to gold or silver bullion to lower your exposure to risk and hang onto more of your savings during the next market crash.

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FTC Disclosure: We are an independent blog that aims at providing useful information for retirement account owners interested in alternative assets like precious metals. However, our content does NOT constitute financial advice. Please speak to your financial advisor before making any investment decision. Also, the data quoted on this website represents past performance and does not guarantee future results.


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