Going from Traditional IRA to Solo 401(k)?

[Harry Metzinger]

Hi BP, I currently have Traditional IRA funds that are invested in stocks, but lately I have educated myself about going the self-directed IRA route. I met with a self-directed IRA custodian yesterday. However, given the advantages of a Solo 401k over a Self-Directed IRA - no need for a custodian, the ability to receive debt financing on real estate acquisitions and not pay UDFI, and the ability to make loans to myself if necessary, to name 3 - have given me pause whether the Self-Directed IRA is the way to go. I have a W2 job and then on the side, I have earned about $2,000 in a seasonal, temporary position this year (without going into details, it's money I can make while at my computer). This is my first year of self-employment history. The revenue and expenses related to this side hustle are in my own name, not an LLC.

Question #1: Given the facts above, would I be eligible for a Solo 401k?

Question #2: Would I be able to transfer the balance of my IRA into a Solo 401k, even though the balance in my IRA far exceeds my self-employment income?

Question #3: Do I need to set up the Solo 401k in the name of an LLC?

Question #4: While I mentioned before that no custodian is needed w/ a Solo 401k, can I presume too then that a manager (whoever would be the equivalent of the person who cuts checks for your SD IRA if you had checkbook control) is not needed for a Solo 401k either?

Any other related feedback on these topics is welcome too. I am convinced that going the Solo 401k route over the SD IRA route is the way to go, as long as both options are on the table for me.

I am meeting with a CPA who I was referred to by the self-directed IRA custodian next Friday, but rather than have these questions rattle around in my head unanswered until then, I welcome the BP's community's responses. I will still be meeting w/ said CPA regardless. Thanks.

[Dmitriy Fomichenko]

Harry, to answer your questions:

1) If you intend to continue your self-employment then you are eligible for a Solo 401k plan.

2) You can rollover your IRA into Solo 401k, regardless of the balance. There is no limit on the rollover, the contributions however are based on your self-employment income and will be limited.

3) You don't need an LLC to establish Solo 401k plan, you can do so as a sole-proprietor.

4) With the Truly self-directed Solo 401k your role as trustee will give you the ability to have total (checkbook) control over your retirement funds.