401K’s

401K’s was Originally Posted on May 29, 2009 by lavarock

A few years ago I needed access to money to fix up the farm and make it productive. One way to do that was to borrow my own money from my 401K. These loans go by various names, like PLAN4ONE and SOLO-401K.

A little know fact is that under certain circumstances, you can borrow your own money for a small fee each year. Then you make periodic payments back into your 401K with interest. So you borrow your own money and pay yourself back with interest. The plan administrator takes a small fee for filing and paperwork. These truely are 401-K plans where you can manage the investments. In my case, I am the employer and the only employee.

You are limited to borrowing 1/2 the money or $50,000. If you are a sole-propriator with or without spouse and have no employees, the loan may be the way to go. I caution you to check with your tax person, but this may be for you.

You should know that the loan is limited in years and its length is based upon whether you are buying your 1st home or are using the funds for something else.

You also need to make sure tha tyou can repay on schedule, or the loan is considered an early withdrawal of funds. Again, check with a tax professional.

Anyway, I took a loan and am paying it back to myself. The compay I went with, PAI, thought my farm story was interesting enough to put in their internal newsletter so that their employees could read a personal story of one of their customers! They also sent along to me a nice framed thank you with signatures of some of the employees!

I would post a photo of that but since it contains signatures, I will not. However, I really appreciate the thank you and will hang it in the office here for all to see.

For information on the plan I signed up for, visit http://www.pai.com/FSP_plan4one.html