Hi Everyone, I'm leaving my job and have a 401k that I want to roll over into a Self-Directed IRA. Which companies would your recommend. I plan on investing in the Portland, Oregon area.
Thanks in advance for time and recommendations.
You can see the bigger pockets list of SDIRA providers here. Hopefully this list can help you find a custodian that offers the best option for you. Some things to consider besides the price when choosing a SDIRA custodian
1. Knowledgeable - They can tell you if a transaction is prohibited or not.
2. Reachable - They answer you when you call or email. After many years in the industry, one key thing for me is being able to reach a person to answer my questions in a timely manner
3. Speed - You will want a custodian that has a quick processing time so your investments will not be delayed
4. Location - The custodian does not need to be in the same state as you reside or invest in. We have clients all over the country and even some American citizens temporarily in other countries. It is nice to have a custodian so close you can drive there, but often the best custodians might be a state or two over.
Hope this helps in your search. I would be happy to connect and help with any additional questions you may have along the way
IRA Services Trust Company is a popular one. They have been in business since 1978 and have never had any issues with the regulators.
Look at a rolling to a Solo 401K is you can qualify, they are much superior for real estate investing and less expensive to maintain than a SIDRA you might want to reach out to @Dmitriy Fomichenko he will talk you through your options at no charge
Hope this helps
I agree with @Cameron Skinner , the Solo 401k will likely be a better choice for you if you're eligible. Otherwise, the SD IRA is a great platform.
Compared to an IRA, Solo 401k contributions limits are roughly 10x higher and there is no custodial requirement for the 401k. You can take participant loans from the plan, you don't need the additional expense and administration of an LLC to have checkbook control, and there is a built in-Roth component. A spouse can also participate in the same plan, there are additional tax benefits compared to an IRA, and there is generally greater privacy. Finally, the plans are often quicker to setup and cost less money over time especially compared to most IRA LLCs.
@Justin Windham thanks for the mention
@Brian Braunhuber to add to Justin's points you can also have a non recourse loan inside a Solo 401K which is unavailable to you in a SIDRA without out triggering URBIT Tax. And you can also take up to a 50K personal loan from your Solo 401K if you get in a pinch.
Thanks everyone for your help. Not sure if I will qualify for the Solo 401k. I will try to get in touch with @Dmitriy Fomichenko to talk over my options.
Are you self-employed?
At minimum, perform part-time self-employment work. (Note that you can also work for a full-time employer that offers a 401k plan and still participate in a solo 401k plan as long as you also perform par-time self-employment activity.)
For qualifying for a solo 401k, self-employment activity is generally an activity carried on for a livelihood or in good faith to make a profit. The facts and circumstances of each case determine whether or not an activity is a trade or business. The regularity of activities and transactions and the production of income are important elements. You do not need to actually make a profit to be in a trade or business as long as you have a profit motive. You do need, however, to make ongoing efforts to further the interests of your business.
Following are the similarities and differences between the solo 401k and the self-directed IRA.
The Self-Directed IRA and Solo 401k Similarities
- Both were created by congress for individuals to save for retirement;
- Both may be invested in alternative investments such as real estate, precious metals tax liens, promissory notes, private company shares, and stocks and mutual funds, to name a few;
- Both allow for Roth contributions;
- Both are subject to prohibited transaction rules;
- Both are subject to federal taxes at time of distribution;
- Both allow for checkbook control for placing alternative investments;
- Both may be invested in annuities;
- Both are protected from creditors;
- Both allow for nondeductible contributions; and
- Both are prohibited from investing in assets listed under I.R.C. 408(m).
The Self-Directed IRA and Solo 401k Differences
- In order to open a solo 401k, self-employment, whether on a part-time or full-time basis, is required;
- To open a self-directed IRA, self-employment income is not required;
- In order to gain IRA checkbook control over the self-directed IRA funds, a limited liability company (IRA LLC) must be utilized;
- The solo 401k allows for checkbook control from the onset;
- The solo 401k allows for personal loan known as a solo 401k loan;
- It is prohibited to borrow from your IRA;
- The Solo 401k may be invested in life insurance;
- The self-directed IRA may not be invested in life insurance;
- The solo 401k allow for high contribution amounts (for 2017, the solo 401k contribution limit is $54,000, whereas the self-directed IRA contribution limit is $5,500);
- The solo 401k business owner can serve as trustee of the solo 401k;
- The self-directed IRA participant/owner may not serve as trustee or custodian of her IRA; instead, a trust company or bank institution is required;
- When distributions commence from the solo 401k a mandatory 20% of federal taxes must be withheld from each distribution and submitted electronically to the IRS by the 15th of the month following the date of each distribution;
- Rollovers and/or transfers from IRAs or qualified plans (e.g., former employer 401k) to a solo 401k are not reported on Form 5498, but rather on Form 5500-EZ, but only if the air market value of the solo 401k exceeds $250K as of the end of the plan year (generally 12/31);
- When funds are rolled over or transferred from an IRA or 401k to a self-directed IRA, the amount deposited into the self-directed IRA is reported on Form 5498 by the receiving self-directed IRA custodian by May of the year following the rollover/transfer.
- Rollovers (provided the 60 day rollover window is satisfied) from an IRA to a Solo 401k or self-directed IRA are reported on lines 15a and 15b of Form 1040;
- Pre-tax IRA contributions on reported on line 32 of Form 1040;
- Pre-tax solo 401k contributions are reported on line 28 of Form 1040;
- Roth solo 401k funds are subject to RMDs;
- A Roth 401k may be transferred to a Roth IRA (Note that from a planning perspective, it may be advantageous to transfer Roth Solo 401k funds to a Roth IRA before turning age 70 ½ in order to escape the Roth RMD requirement applicable to Roth 401k contributions including Roth Solo 401k contributions and earnings.);
- Roth IRA funds are not subject to requirement minimum distributions (RMDs);
- The fair market value (FMV) of assets held in a self-directed IRA is reported on form 5498;
- The fair market value of assets held in a solo 401k are reported on Form 5500-EZ;
- At termination, the solo 401k is required to file a final Form 5500-EZ and 1099-R; and
- At termination, the self-directed IRA is only required to file a form 1099-R.
@Brian Braunhuber , be sure to do your homework. I ended up going with IRA Services Trust Company directly. I was told by one of the "experts" on here that I needed to set up a special purpose LLC with that organizaton and could not use a custodian directly. Guess what? WRONG! And the funny part is, had I gone with that organization to form my special purpose LLC, they simply would have charged me a few thousand dollars and then handed me off to the custodian they use. And do you know who that custodian is? You guessed it: IRA Services Trust Company.
I will say that their service is a bit slow and there are, like anywhere, a few customer service folks that seem a bit incompetent, but at the end of the day, we got it done and I saved thousands by not being talked into having someone else form that special purpose LLC for me. Now, with that said, depending on the TYPES of investments you'll be doing, you may need the LLC, so don't completely rule it out; just make sure you actually need it before you spend all that money. I was very clear about what my investment was going to be and what my goals were and I STILL was being sold something I didn't need. Just be careful.