Well, I won't be taking Rich Dad's advice on this or anything else.
His opinions on 401K's are well documented as simplistic and they don't apply to this situation. He is referring to most employees who choose to put money in their company 401K plan. The trustees of those accounts do put severe restrictions and charge high fees (not taxes). We are talking about something very different.
His basic complaints are 2 fold.
1) Most people invest their 401K funds in mutual funds which pay tax and have fees and expenses and have market risk..
This is irrelevant to our discussion. We are not investing in mutual funds.
2) He believes your income tax bracket will be higher when you take the money out than it is now. This may be true or this may not be true. If you think it will be true then you do a Roth and pay the tax now.
If you don't you do the reg 401K. Problem solved.
He also ignores the benefits of tax free compounding in the reg 401K.
As Kevin (and nearly every legit financial expert) says a 401K is one of the most powerful wealth building vehicles available.
Can you invest in money-losing things with it? Yes. But the vehicle itself is great and the solo 401K is the way to use it to its fullest potential.
I also looked into the Nabors Group. I thought their fees were quite high. A couple grand if I remember.
I saw on their website that they are just the middleman and they use Sunwest Trust.
So I went direct to Sunwest Trust and they do their i401K for $500 and no annual fees.
By far the best deal I found. I just received the plan last week and am opening the accounts any day.
I've looked into both Nabers and Sunwest. I liked how thorough the information was from Nabers, but they have a setup fee of around $2600 with an annual fee of $400. I'm still waiting to hear back from Sunwest.
Eric- Any idea how long it takes from the day you set it up to the day you can start using funds to invest?
I use Equity Trust for my Solo 401k. Their fees are dirt cheap compared to others. You can have checkbook control and for my money I would rather have a third party as part of my 401k process as an additional layer.
Another person to talk to on here is Matt Mathews if you are interested in doing it on your own.
Kevin- How long did it take to setup before you could start putting your money to work? I suppose if one was rolling over from a previous account it would take longer.
As far as timing. When I rolled over to Equity Trust years ago it took about 2 weeks for everything to work itself out and funds to be available.
Recently when I opened with Sunwest, the whole process took about 5 days.
With regard to fees, it just depends how much hand holding you need. There are alot of rules for what is allowed and what isn't. After several years with Equity Trust, I feel I have a good handle on what is allowed. So I feel comfortable being my own trustee at Sunwest. Obviously Sunwest is there to answer questions but having checkbook control does mean you could put your money somewhere improper. Equity Trust won't allow that.
Again, with me having experience, the fees are a no brainer. Nabors is $2600 plus $400 a year. Sunwest is $500 plus $0 per year. Same product.
Equity Trust was about $600 per year annual for me. Setup was minimal since it didn't involve checkbook control.
For me from emailing in the paperwork to getting the account setup and available for use took 3 days and I did not utilize their "Express Service" for an additional $50.00.
If you were rolling funds over to ANY Solo 401k or Self Directed IRA custodian you are at the mercy of the fund advisor that the money is coming from. Some are quick and easy, while others are like pulling teeth getting your money over there.
I think Eric makes a great point. If you are just starting out, go with someone that will put some "restrictions" ie, will watch over your account while it grows. Then after you get a good handle on Solo 401k accounts, you can decide if you want checkbook control and more freedom.
I personally like having an active third party custodian watching over my accounts. Self Directed IRA and Solo 401k's are becoming more and more popular, and its my personal opinion is these accounts are going to come under greater scrutiny in the coming years. For some small fees, I would rather have someone double-checking my work.
Have any of you used NAFEP? They have this iTrust thing that looks right for me. I'm just still concerned about sending a lot of money to a little company I know nothing about. I sure wish Fidelity did SDIRAs.
Why even bother starting a 401(k)?? Seems like I just read an article the other day that 401(k) plans are the highest taxed form of retirement savings. Seems kind of DUMB to put your money into a program that has strict rules as to how it can be used. By keeping other people's hands off of your pocket book, you have more to use for the actual investing!
The SOLO ROTH 401k can be the best program for investing in real estate in a tax-free environment. With real estate held in a self directed IRA or 401k you get asset protection, liability protection and Uncle sam protection. There really isn't a better environment to create wealth!
Why even bother starting a 401(k)?? Seems like I just read an article the other day that 401(k) plans are the highest taxed form of retirement savings. Seems kind of DUMB to put your money into a program that has strict rules as to how it can be used. By keeping other people's hands off of your pocket book, you have more to use for the actual investing!
Please cite this article that is "seems like your read". I have never paid a dime in tax on my 401K money in 15 years.
The WHOLE idea of a solo 401K is exactly to keep other's hands off your pocket book (I am the trustee) and to avoid 90% of the restrictions that most trustees put on retirement funds.
The gov't does not restrict use much, it is the trustees that restrict the use. The gov't actually gives very wide latitude to invest your retirement funds. Most people don't take advantage of that.
Well, I won't be taking Rich Dad's advice on this or anything else.
His opinions on 401K's are well documented as simplistic and they don't apply to this situation. He is referring to most employees who choose to put money in their company 401K plan. The trustees of those accounts do put severe restrictions and charge high fees (not taxes). We are talking about something very different.
His basic complaints are 2 fold.
1) Most people invest their 401K funds in mutual funds which pay tax and have fees and expenses and have market risk..
This is irrelevant to our discussion. We are not investing in mutual funds.
2) He believes your income tax bracket will be higher when you take the money out than it is now. This may be true or this may not be true. If you think it will be true then you do a Roth and pay the tax now.
If you don't you do the reg 401K. Problem solved.
He also ignores the benefits of tax free compounding in the reg 401K.
As Kevin (and nearly every legit financial expert) says a 401K is one of the most powerful wealth building vehicles available.
Can you invest in money-losing things with it? Yes. But the vehicle itself is great and the solo 401K is the way to use it to its fullest potential.
Nail on head Michael!
To add, self administered 401k's allow for higher contribution limits than IRA's do as well as offer borrowing provisions which IRA's do not.
Thank you Steve, correct. I meant ERIC Michaels. Typing too fast and excited about it now that my cast is finally off and I now have two hands again! Horrrrrayyyyyyy!!!
I'm looking into solo Ks more lately because folks I know are asking about them. Is there a solo K s-corp construct for someone that would do both passive investments and a few development or other "active" deals?
My apologies for another attempt to bump this thread, but I was hoping for some additional commentary on solo Ks. Is Sunwest Trust still what people are touting?
They were easy to work with, had low fees, answered any questions I had (which with my background in self directed plans - were not exactky the common easy questions) and were very friendly and helpful. What more could you ask!
I bought a solo K this week from LodestarSD. I am quite happy with the purchase after trading voicemails with Sunwest Trust for 2 days. I am sure they are good, but the lack of access to someone that called back on time killed the sale for me.