401K to Self directed IRA

6 Replies

Hi, my name is Gerald Mamuric and I am a New here in Bigger Pockets. I would like to start investing using my 401k savings but don’t want to get hit with fees. I’ve heard in one of the programs about moving it to a SELF DIRECTED IRA but when I called Fidelity, they said if I am going to use it to purchase a real estate, they don’t cater to that program. Does anyone know which company caters to this type of program? I live in somerset county New Jersey if it matters. Thanks

@Gerald Mamuric

The mainstream financial services firms do not deal in self-directed IRA plans for investing in alternative assets. Their business model is 100% focused on commissionable publicly traded assets. There are many specialty providers of such services, several including ourselves who are active here on BP.

Ultimately, a self-directed IRA is very much still an IRA, with all of the same rules, timelines, etc, focused on tax-sheltered retirement savings.

There are several plan formats, and you will want to start by identifying the best for your situation and goals.

Self-directed IRA custodians are processing agencies. They open accounts, hold funds, sign documents, issue payment for expenses and receive income based on your direction. This intermediary model is fine for investments that are pretty singular and static in nature, but can be problematic for more time sensitive and transaction intensive assets such as rental property.

A Checkbook IRA LLC starts with such a custodian held IRA, but the IRA makes a single investment into a specially formed LLC. You can have the role of manager with the LLC and therefore signing authority. This vehicle allows you to use the LLC as your transacting layer under the tax-umbrella of the IRA. The LLC model eliminates the paperwork, processing delays and per-transaction fees of the custodian for each and every action.

A Solo 401(k) is similar to the IRA LLC in providing you with direct control of the funds, but based on a 401(k) format. This plan is available to those who qualify by being self-employed and having no full time employees.

There is a lot of good information here on BP on the topic as well as many varied providers.  Do some quick reading and then get on the phone with a handful of providers.  You should be able to pretty quickly hone in on the right tool for your needs and who is a quality provider (vs just a marketing company).

@Gerald Mamuric

Welcome to Bigger Pockets!

You'll need a specialty custodian to setup a self-directed IRA or a plan provider to create a Solo 401k for you. The Solo 401k requires self-employment activity, but offers a lot of advantages over an IRA. There are a few providers here on BP that post regularly to these forums that could help you with either.

Are you self-employed? By the way, how are things in NJ? I'm originally from Middlesex County.

@Gerald Mamuric , welcome to BiggerPockets and congratulations on your first post!

You are in the right place to learn about self-directed retirement accounts and alternative investment options. This is a topic of frequent discussion here on the forum. There is a specific forum category dedicated to this topic:

https://www.biggerpockets.com/forums/51-tax-legal-...

I would recommend that you start by reading some relevant discussions (use BiggerPickets search feature) so that you can educate yourself. See who the key providers are, review their references and feedback from other clients who used their services and then contact few of them to have a conversation. Then you will be able to narrow it down to the one you want to work with. And feel free to ask any follow up questions here! 

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