Self direction i401k with checking AND brokerage

[Shawn Hyde]

I am strongly considering opening a Self Administered, Self Directed i401k so that one of the investment vehicles can be - you guessed it - real estate notes and mortgages.

With that said, I don't want to preclude myself from having a brokerage account to hold cash and hopefully earn some money in the stock market when I don't have the money lent in real estate.

My question is this:  Do the brokerages (IE: Fidelity, etc), understand this arrangement?  It seems to me I would first open the i401k, get an EIN number for it, and then open a REGULAR brokerage account in the name of the i401k.  Sounds simple to me, but am I going to run into roadblocks trying to get this done?   

Second question: Who do you recommend for initial setup of the i401k?  I found SunWest Trust and while I don't mind the initial $500 setup fee, I'm not thrilled with their $200 annual fee for doing basically nothing.  Is there another option that is more cost effective?  Heck, can I do the whole thing myself?

Thanks!

[William Morrison]

I used Sense Financial to setup my Solo 401k and have been very happy.  You need to make sure your documents speak to a brokerage account.  They took care of that for me.
I then use OptionsXpress as my brokerage.  It's owned by Schwab.  It was a smaller broker focused on complex options and bought by Schwab keeping the trading platform.  You will not be able to set it up online.  You will have to talk to a real person.  And you may have to talk to more than one person to get them or any broker to realize you are not trying to setup a 401k managed by them.  But you are trying to have the same trading rules.  Most brokers have 401k product they will want to sell you having no idea what a Solo 401k is or how you might be the Trustee.  I contacted several, same at each.
Even my large nationwide bank took some time to explain that I wanted an account not a managed 401k by them.  Sense Financial has a pretty good cheat sheet for the bank.  You better know the broker rules yourself.  You don't want to have prohibited trades in allowed in your account.

[Justin Windham]

@Shawn Hyde

Your general outline of the setup process is correct. With the IRS-approved 401k documents, EIN and support from a self directed 401k provider, you'll be able to open brokerage and/or bank accounts for your 401k and invest into the assets you'd like to have in your retirement account whether traditional (such as stocks) or alternative (such as real estate).

While you will not be able to setup the Solo 401k yourself, there are more cost effective providers out there.

[Dmitriy Fomichenko]

@Shawn Hyde Like others said, you are correct about the process of setting up a bank account and/or a brokerage account under the name of the SD 401k. 

The only roadblock you may face is that the staff at a bank or brokerage firm you talk to may not be familiar with the self directed 401k setup and may have additional questions. However, most SD 401k plan providers are familiar with the situation. Many investors want both real estate and traditional investments too! Your plan provider should be able to help by connecting you with their contacts at different banks or brokerage firms, or providing additional documents to explain the setup.

[Mark Nolan]

@Shawn Hyde

Many of our clients use Fidelity for their checkbook solo 401k which allows them to invest in both alternative investments such as real estate and notes while also being able to invest in stocks and mutual funds through the brokerage account. This type of account is referred to as a Non-Prototype Account by Fidelity.

[Shawn Hyde]

Thank you Mark!  I am in the process of opening a Solo 401k through your company and will be setting up a Checkbook Fidelity account.  I appreciate your assistance.

[Justin Windham]

@Shawn Hyde

How are you liking things in Boulder after moving from Florida?

[Shawn Hyde]

Actually, we ended up staying in Florida. I need to fix my profile on here!