A lot of high earners have more money in retirement accounts than anywhere else. So a common question is whether you can use that money to invest in private real estate.

You can, and one of the best tools for it is a Solo 401(k). It isn't available to everyone, though. And it isn't automatically the right move even if you qualify.

A quick note before we start: I'm not a CPA, so please talk to yours before acting on any of this. The tax code also changes often, so take this article as a step in the right direction, not the final word.

What is a Solo 401(k)?

A Solo 401(k) is a 401(k) plan for a business with no employees other than the owner (and the owner's spouse).

You get the same kind of plan a big company offers, with you on both sides. You contribute as the employee and also as the employer.

If you set it up as a self-directed Solo 401(k) through a provider that allows alternative investments, it can invest in private placements like real estate syndications.

I set up a Solo 401(k) for my own investing for exactly this reason.

Who qualifies?

You need self-employment income. That can come from:

• Consulting or freelance work (1099 income)

• A side business

• Board seats or speaking fees paid to you directly

• A small business you own with no full-time employees besides you and your spouse

If you only have W-2 income from an employer, you don't qualify. But many engineers, tech workers, and doctors have some side income from consulting, contract work, or locum shifts. That can be enough to open a plan.

How much can you put in?

For 2026, the IRS limits are:

• Employee contribution: up to $24,500

• Catch-up if you're 50 or older: an extra $8,000 (or $11,250 if you're 60 to 63)

• Total limit, employee plus employer: $72,000, not counting catch-up contributions

Two catches. Your employer contribution depends on your self-employment earnings. And the $24,500 employee limit is shared with any 401(k) you have at your day job. If you max out your work 401(k), you've used that part up.

Many plans also let you roll in money from old employer 401(k)s or IRAs. That's often where the real investing dollars come from.

Solo 401(k) vs. self-directed IRA

Both can invest in syndications. The big difference for real estate is debt.

Most syndications use a mortgage. When an IRA invests in a deal that uses debt, part of the income can be hit with a tax called UDFI (unrelated debt-financed income), a type of UBIT. That's tax inside an account that's supposed to be tax-advantaged. I cover it in more detail in Navigating UBIT in Real Estate Investments with Self-Directed IRAs.

A 401(k) is treated differently. Under the tax code, qualified plans like a 401(k) generally get an exemption from UDFI on debt-financed real estate. The exemption comes with conditions, and some deal structures can still trigger tax, so check with your CPA. Still, it's a meaningful advantage over an IRA for leveraged real estate.

Other differences:

The tradeoffs nobody leads with

You lose the depreciation benefit. One of the biggest perks of real estate syndications is depreciation, the paper losses that can offset your other passive income. Inside a 401(k), those losses don't help you. If you have cash outside your retirement accounts, it's often more tax-efficient to put real estate there and keep stocks in the 401(k). Run the numbers both ways. See Tax-Saving Strategies for Commercial Real Estate Investors.

Prohibited transactions are serious. Your plan can't do business with you or close family members. For example, it generally can't invest in a deal you or a family member controls. A violation can blow up the tax status of the whole account. Know the rules before you invest.

There's paperwork. Once your plan holds more than $250,000 at the end of the year, you'll generally need to file Form 5500-EZ with the IRS each year. Missing it can mean steep penalties.

Self-directed providers charge fees. Setup and annual fees vary. Compare a few providers.

Your money is locked up. Syndications are illiquid, often for 5 years or more. Make sure you won't need that money for required distributions or anything else during the hold.

How to get started

1. Confirm you have self-employment income and talk to your CPA about whether a Solo 401(k) makes sense for you.

2. Choose a provider that offers a self-directed Solo 401(k) with alternative investments allowed. Ask about Roth options and checkbook control.

3. Get an EIN for your business if you don't have one. The plan is tied to the business.

4. Open the plan and a bank account in the plan's name.

5. Fund it with contributions, a rollover, or both.

6. Invest. The subscription documents for a syndication are signed in the plan's name, not yours, and the money comes from the plan's account.

The bottom line

If you have self-employment income and want to put retirement money into private real estate, a Solo 401(k) can be a strong option. It's especially attractive for leveraged deals where an IRA might owe UDFI tax.

But it's a tool, not a default. If you have taxable dollars available, depreciation may make those the better place for real estate. Get your CPA involved early.

Want to go deeper on self-directed accounts? Watch our two-part Self-Directed IRA video series.