What Can I Invest In Through A Solo 401k?

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As a business of one, you can contribute more and potentially save more on taxes.* Carry’s Solo 401k is built for entrepreneurs, freelancers, and high earners who want flexible investing and bigger retirement contributions, all in one streamlined plan.

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*Solo 401(k) eligibility and contribution limits depend on IRS rules. Carry does not provide tax advice, consult a tax advisor. Carry Advisors LLC, an SEC-registered investment adviser, provides investment advisory services for discretionary and non-discretionary accounts (e.g., Solo 401(k), IRA, taxable brokerage accounts). Bank and trust accounts are not advised by Carry Advisors. Brokerage accounts are introduced by Global Carry LLC and carried by DriveWealth LLC, both members FINRA/SIPC. Advisory fees may apply and additional disclosures are described in our Form ADV and CRS.

A Solo 401k typically gives you broad investment flexibility. Unlike a traditional 401k that limits you to a narrow selection of mutual funds or target-date portfolios, a Solo 401k can offer access to a much wider range of assets.

The IRS does not publish a list of approved investments for Solo 401k plans. Instead, it focuses on the types of assets that the plan cannot hold.

This article explains which investments are not allowed and highlights several popular investment options Solo 401k account holders often consider.

Investments Not Allowed in a Solo 401k

A Solo 401k generally allows you to invest in almost any asset type. But there are a few exceptions defined by the IRS. Understanding these prohibited investments is key to avoiding unexpected taxes or penalties.

Collectibles Are Not Allowed

Collectibles are strictly off-limits in a Solo 401k. If your plan purchases any collectible item, the IRS treats the cost as a distribution rather than a legitimate investment. This could make the amount subject to income taxes and early withdrawal penalties.

According to IRC section 408(m)(2), collectibles include:

📝 Note: The IRS treats these assets as personal-use items, not qualified retirement investments.

Restrictions on S Corporation Stock

Your Solo 401k can typically invest in shares of a corporation, limited liability company (LLC), or partnership, even if they’re privately held. However, owning S corporation stock comes with specific rules.

Solo 401k plans are considered tax-exempt retirement trusts under IRC Section 401a. These trusts are allowed to hold S corp stock under IRC Section 1361(c)(6).

❌ IRAs do not qualify for this exception, which means they cannot hold S corporation stock.

📝 Note: The Solo 401k trust itself, not you personally, must meet IRS requirements to qualify as an eligible S corp shareholder.

Limits on Life Insurance Policies

A Solo 401k may include life insurance contracts, but only under certain conditions. The insurance policy must be incidental to the plan’s retirement benefits, not a primary investment vehicle.

According to IRS Publication 560, this usually means the policy must represent no more than 25% of the plan’s contributions when using a whole-life policy.

These limits are designed to maintain the retirement-focused intent of the Solo 401k and preserve its tax-favored status.

Things You Can Invest in With a Solo 401K

Outside of the restrictions listed above, a Solo 401k generally gives you access to a wide range of investment options. While the IRS does not publish a specific list of what is allowed, most assets are permitted as long as they are not explicitly prohibited.

Here are some common investment types used by Solo 401k account holders:

📝 Note: Most Solo 401k plans with direct account control (also called “checkbook control”) lets you invest beyond public stocks or funds. Just make sure your investment follows IRS rules and avoids prohibited transactions.

Choosing Investments for Roth vs. Traditional Solo 401k Accounts

A Solo 401k can include both a traditional (pre-tax) and a Roth (after-tax) account. You have the flexibility to decide which investments go into which portion of the plan.

Here’s a quick comparison:

This structure gives you flexibility to align your investments with your future tax outlook. If you don’t know the specific differences between the two accounts, you can read this guide.

✏️ Hypothetical Example: If you expect a certain investment to grow significantly by retirement, you might choose to place it in the Roth portion to potentially benefit from tax-free gains. Meanwhile, assets with more modest returns might be better suited for the traditional side.

Wrapping Up

Solo 401k investment rules are generally straightforward. The IRS does not publish an official list of permitted assets, since most investment types are allowed.

As long as you avoid collectibles, certain insurance products, and prohibited transactions under ERISA or IRS rules, you typically have wide flexibility. That includes the potential to invest in private businesses, real estate, or even S corporation stock, provided the Solo 401k trust qualifies under the tax code.

This level of control lets you build a retirement portfolio that fits your strategy, whether you’re buying public stocks or exploring alternative investment strategies.

📌 Curious about how rules on prohibited transactions or disqualified persons might affect your plan? Check out our other Solo 401k articles for more guidance.

Disclaimer:

The Carry Learning Center is operated by The Vibes Company Inc. (“Vibes”) and contains generalized educational content about personal finance topics. While Vibes provides educational content and technology services, all investment advisory services discussed on this website are provided exclusively through its wholly-owned subsidiary, Carry Advisors LLC (“Carry Advisors”), an SEC registered investment adviser. The information contained on the Carry Learning Center should not be construed as personalized investment advice and should not be considered as a solicitation to buy or sell any security or engage in a particular investment, accounting, tax or legal strategy. Vibes is not providing tax, legal, accounting, or investment advice. You should consult with qualified tax, legal, accounting, and investment professionals regarding your specific situation.

The accounts, strategies and/or investments discussed in this material may not be suitable for all investors. All investments involve the risk of loss, and past performance does not guarantee future results. Investment growth or profit is never a guarantee. All statements and opinions included on the Carry Learning Center are intended to be current as of the date of publication but are subject to change without notice.

To access investment advisory services through Carry Advisors, you must be a client of Vibes on an eligible membership plan. For more information about Carry Advisors’ investment advisory services, please see our Form [ADV Part 2A] (https://files.adviserinfo.sec.gov/IAPD/Content/Common/crd_iapd_Brochure.aspx?BRCHR_VRSN_ID=916200) brochure and [Form CRS] (https://reports.adviserinfo.sec.gov/crs/crs_323620.pdf) or through the SEC’s website at [www.adviserinfo.sec.gov] (http://www.adviserinfo.sec.gov/).