Starting from scratch with a Self Directed IRA or Solo 401(k)-

[Sam Miller]

Hi, I've been in Real Estate for 6 years and actively investing for 3 years now. I'm 24 years old and think I'll be self employed for the rest of my life and want to finally start preparing for retirement. My parents have a self directed IRA and I know the rules that go along with it. I would like to hear what everyones opinion on the best way to start my retirement. With a self directed IRA or a solo 401k plan? This is all starting from scratch by the way. Looking forward to everyone's responses

[Brian Eastman]

@Sam Miller

If you are and intend to be self-employed with no full time employees, then the Solo 401(k) will be by far the better option. As investment vehicles the IRA and 401k are largely similar. As a retirement plan, the Solo 401(k) is vastly superior, with significantly higher contribution capacity, the ability to make Roth contributions of up to $18K per year with no income limitations, etc.

Depending on your ability to contribute, and therefore how quickly you can amass some working capital, you may choose to start with a fully self-directed Solo 401(k) or you may choose to establish a low-cost brokerage Solo 401(k) that would be limited to investing in stocks, funds, etc. for the near term.  You could then upgrade to the self-directed format once you actually have funds to meaningfully self-direct.  Both options work, but cheap and simple to start may be appealing.