Favorite Solo 401K company? Why?
Investor · Mission Viejo, CA · Member since 2012 · 627 posts · 204 votes
What is you favorite solo 401K company? Why?
I see that My Solo401K.net has a very nice web site with loads of useful information.
I see that BroadFinancial.com also has a nice web site, but you have to call to learn their fees.
Thanks @Jeff S. for the advice, and I didn't mean to say you were old.... just older than me :) I will read the thread, and I will contact Mr. , if anything to ask some question via BP. I appreciate your help, and its my honor and privilege to serve men (and women) like those here on BP.
I have a solo 401k and lend out of it.
I use Equity Trust, but they are a bear at getting the deal done.
In my opinion, I'd be sure to check 3 things:
1. How much effort do they put in to making sure you don't do a prohibited transaction? Some do nothing about that, and it's easy to screw up.
2. Try to find a company with a flat rate so you don't get nickel and dimed to death for every transaction or bill pay
3. Get references from other people who use them as to how difficult they make it to get a transaction done. Don't ask them, they'll tell you it's wonderful and fast.
Equity Trust is good with #1 and #2, and sucks at #3.
I have an SD 401k plan with checkbook access that was set-up by my CPA using the prototype plan he uses at his firm. I too lend out of it.
As I see you know, if you Google self-directed 401k, you'll get many hits for companies that create these. Consider though that your CPA might allow you to use his for a nominal fee, which would save you a significant cost.
Your decision will depend, in part, upon whether you want checkbook control or not and you didn’t say. If you do, then you effectively become the trustee/administrator and don’t need a company like Equity Trust. Nor do they want you because you effectively cut them out. Other, more specialized companies (or your CPA), set these type of plans up.
Alternately, if you want the protection of another set of eyes on your deals, without the checkbook, many of the self-directed IRA companies offer SD 401k plans. I have my SD IRA through IRA Services, I also use them for lending, and I couldn't be happier. I don't know if they offer an SD 401k option though. In all cases, be careful of what you hear.
I hate to be cynical, but when you get references online for plans as these, make sure it comes from someone who actually has and uses the plan in the manner that you will, along with specifics about what they do and don’t like. Ann’s pro and con comments, for example, are specific and useful. You might give a bit more detail about what you're trying to do, Stephen Masek.
I constantly see recommendations here from those who know others who are happy, or who were impressed because they saw a company representative present at a real estate club, or perhaps they sell plans themselves. None of these are useful recommendations. Be careful too of the “nice web site.”
Jeff
I think you have it backward, Bruce M.. You can loan any amount you want to others. You're only allowed to personally borrow up to $50k or 1/2 of your vested plan benefits, whichever is less.
There are many others rules, including who you can loan to, but that's it at it's simplest.
Jeff
I'm talking about the checkbook control plans. The prohibitions seems quite straightforward, and my wife and I are good at record-keeping, so don't want to pay for services which just add cost and complexity.
It would certainly be helpful if somebody who recommends a company states if they use it or not.
@Jeff S You mention in your commentary that a CPA with a solo401k might allow you to use his for a fee. I just want to be 100% certain on this one...Does that just mean using his solo401k as the prototype for my solo401k as was apparently done for yours? I'm guessing this is similar to how people charge a fee for using their LLC docs as prototype to someone else's LLC docs?
To clarify Daniel L., we do not work for our CPA and are not members of the 401k plan at his firm. He simply sells prototype plans, as many other plan administrators do. In his case, it’s a tiny part of his business and he prepared our documents for probably 10% of the quotes we were receiving from others. It’s more of a courtesy he provides for his long term clients.
We’ve had a multi-decade relationship with him so he knows our financial position better than we do and knows exactly what we need. Better than calling a stranger who sells 401k plans, and telling them what you think you want. He’s also a retirement plan expert and I can call him frequently with my usual dumb questions.
Hope this helps.
Jeff
I opened an individual 401K with Vanguard last year. Very simple process, about 15 minutes to fill out forms and e-mailed back. If you have other Vanguard investments, this one just shows up as another account with easy account through a browser or their mobile app. There is $20 fee per year per fund you are invested in or no fee if you qualify as a Flagship or Voyager client. Very cheap.
Nothing wrong with this, but understand these plans are only self-directed to the extent you want to buy the stocks, bonds, and mutual funds available through Fidelity. You cannot buy or manage real estate, loan money, buy paper, or have the checkbook access you get with the plans mentioned above.
This might be Ok if your alternative is keeping funds in a very limited, high fee, 401k that many employers seem to offer through companies such as AIM. I suppose you could buy REITS, but you won’t have the benefit of either a custodian working under your direction, as a firm like Pensco will do, or ultimately, 100% control through a checkbook. It’s important you understand what you're getting into.
Jeff
Hi, I'm new to the site. Was just learning and exploring and came across this post. I'll provide my feedback and maybe it will be helpful to someone. I am a client of http://www.sensefinancial.com/ and I can say I am a happy client. I found the company using web search. I typically skeptical doing business with someone I never met in person, but after doing my due diligence and talking with the representative several times I felt comfortable. They have a good reputation, I could only find positive review on Yelp, LinkedIn and Google. I been investing in real estate for many years and now have the ability to do it tax free using my self directed Individual 401k plan with the trust account and checkbook control.
This is only available if you are self-employed or your employer specifically allows you the option of a self-directed 401(k) correct?
The military TSP has got to be the worst 401(k) type plan out there: no matching and only about 5 funds to choose from. They just started a Roth option though, which is pretty nice.
@Michael Stroup,
I have to disagree about the military TSP. True they don't match contributions, but it isn't designed to be a fully-funded retirement plan. If you do 20 years, you get your pension, plus whatever you have in your TSP. Pretty generous when you do the math, and you can borrow against it. Most people would die for that kind of a retirement package! You can keep your match, I'll take 50% of my base pay for the rest of my life.
As for the number of funds, not counting the lifecycle funds, you are correct. But...what else do you need? I can get small cap, large cap, international, bonds, and the ultra-conservative guaranteed G-fund. Plus, the expense ration is 0.027%. That's about 1/4 of the lowest I can find from low-cost mutual funds or ETFs. Sure, index investing is boring, but you can always go crazy with a personal investment account. Nothing stops you from contributing to an IRA on top of your TSP.
I do agree that the Roth is a nice addition, and definitely the way to go.
I use Accuplan and deal with Brian Davis there directly. I know nothing about what makes a good or bad plan but I've loved working with Brian, they are very thorough, I've borrowed from it with no problems, and everything is cut and dry. Very easy to work with.
@Michael S. I have to agree with @Ann Bellamy
people should do their own research with SDIRA's, especially when it comes to fees. I have or will have had one, with Entrust, and the fees every year were a little on the pricey side. However with a SD401k, which I DO NOT have, yet am researching it, sounds like an incredible option. @Jeff S. you have personal first hand knowledge, also with your older post of almost one year ago, what have been your experiences with a SD401K plan? If you have your own company, ie for real estate transactions, can you have that company own the SD401K, and still have check book authority? All transactions you are about to conduct with your SD401k do you run them by your CPA/ attorney? Thanks for any input
"@Jeff S you have personal first hand knowledge, also with your older post of almost one year ago, what have been your experiences with a SD401K plan?"
Wow, an oldie. Nothing has changed, however, @Edwin E., except perhaps that the cost to open an SD401k has dropped and lending restrictions have tightened.
We only loan from our SD401k and will continue to do so. It's among the easiest businesses I've ever run and maintaining the SD401k is brain dead simple. There are many advantages to owning paper in a retirement plan and many disadvantages to owning real estate in one. I had an SDIRA with IRA Services in San Carlos, CA and was completely happy with them. Once I opened the SD401k I closed the SDIRA.
If you can get past the strange characters (I wish BP would fix or explain how to avoid this), this thread: The Best Retirement Plan should give you a good idea of your options. In keeping with your theme, it's from 2011, but still applicable :-)
"If you have your own company, ie for real estate transactions, can you have that company own the SD401K, and still have check book authority?"
This is the only way you can have an SD401K, Edwin. While you sponsor your SDIRA and personally pay into it, an SD401k is sponsored but your company and makes the contributions on your behalf based on your salary. It doesn't matter the type of business (sole-proprietorship to complicated corporation), you have to have a salary for your company to make an SD401k contribution.
You are the trustee of the SD401k and therefore hold the checkbook. Entrust and the like are totally out of the picture. Since you're on your own, it's crucial you know what you can and can't invest in, which is a good reason to first learn with an SDIRA. Don't be intimidated; the basic rules are simple.
"All transactions you are about to conduct with your SD401k do you run them by your CPA/ attorney?"
Not anymore. We have a very systematized approach to lending that I've described ad nauseum in other threads. Our CPA and attorney initially vetted our finances and legal documents, though admittedly, they do change periodically.
Hope this is legal, but @Dmitriy Fomichenko, a contributor here, sells solo 401k's and I'm sure would be happy to provide you with a quote if you contact him privately. I also suggest you find someone local to you.
Consider all options, such as doing all your real estate investing outside of your retirement plan and using your SD401k plan to shelter the income. Depending upon the type of plan, these funds could be invested in notes, tax liens, and other papers to defer or even eliminate the associated tax hit forever.
Good luck Edwin, and thank you for protecting our country.
Jeff
Thanks @Jeff S. for the advice, and I didn't mean to say you were old.... just older than me :) I will read the thread, and I will contact Mr. , if anything to ask some question via BP. I appreciate your help, and its my honor and privilege to serve men (and women) like those here on BP.
@Michael S. and @David Jayne I have a question about TSP. I have one. I don't want one any more. I would like to roll it over into a SD401K. I'm in the process of speaking with Dmitriy to work this process out. My question to either of you is have either of you done this?
Good luck. My suspicion is that they won't let you move it until you retire or separate, but I don't know for sure.
Please post your findings as I am very interested to see if this works out.
@Michael S. & @David Jayne I will absolutely post my findings. This is one of those things that my first CO, who recommended I start investing in the TSP, did yet was not very knowledgeable about. I have spoken with many a military men in my time, and even in my job where there is a higher acceptance and tolerance for risk, when it comes to financial matters the "Don't rock the Boat" and "Scared of Change" mentality hold strong sway over most. This is ONE of ... to many to list reasons I am exiting the military. I'll stay in touch
I believe Michael is right, you can't roll it over until you leave employment with the military. You can close it down, but you will pay about 50% of the balance in taxes/penalties. You can also borrow against it if you want to free up some cash now. I've done two loans, getting ready to do my third. Only $50 admin fee, and you pay yourself back at the G-fund rate (somewhere around 2.25% currently). Only issue is you are supposed to pay it back before you leave or they may require the loan balance to be due upon your separation.
Now that sounds like an awesome deal, but is the maximum $10,000?
"The maximum loan amount is the smallest of the following:
I just checked out the website, and that looks like an awesome deal, except for the $10k max. Did you do general or residential loans? If residential, how long did it take to get everything squared away? Could you set everything up ahead of time so that you come in basically as a cash buyer, or is it as complicated as doing a typical bank mortgage?
Max is $50k. I took out $48,500 in 2010, just paid it off. Caveat is you have to look back 12 months at your loan balance, and subtract that from the $50k max. I have no idea why they do this, but for instance, my balance 12 months ago was about $12k. Thus, if I requested a loan today, I could only pull out $38k ($50k - $12k). Also, you can't originate a loan of the same type (general or residential) until 60 days after you've paid off the previous loan. For instance, I paid off my last loan at the end of December, so I can just now request another general purpose loan.
I haven't done the residential loan, just two general purpose. They were super easy, took a couple of weeks to get the money after I submitted the paperwork (1-2 pages?). Residential requires some additional verification such as a signed contract (don't remember the specifics), so it would probably take a little longer.
Still a great deal overall.