Posted almost 9 years ago

Choosing a Self-directed Solo 401k Provider

Solo 401k Providers

The Solo 401k is an attractive choice for those who qualify and want to take advantage of the many benefits the plan offers.  However, not all Solo 401k providers are the same, and not all providers offer the same advantages and services.  Available advantages vary based on the plan provider. 

 

Solo 401k Rules

 

The IRS defines the Solo 401k as a traditional 401k plan for one employee.  It is designed for the self employed and small business owner; it is perfect for the sole proprietor, independent contractor, and consultant with no employees, with the possible exception of a spouse. 

 

Solo 401k Provider Comparison

 

Solo 401k providers typically fall into one of three categories.  They differ in terms of services offered, such as investment capabilities, types of fees charged, and role of plan owner.  It is important to review these differences first before choosing a provider. 

 

- Self-directed custodians and trust companies

 

This first type of provider allows for alternative investments, such as real estate, private businesses and precious metals.  However, investment control is given to the company holding the investment.  Any potential investments must be submitted, processed, and approved by the company, which may involve various paperwork and delays. 

 

This provider also typically charges fees for processing, account set-up, and asset holding, which may range from a few hundred to over one thousand dollars. 

 

Examples:  Equity Trust, Entrust

 

- Banks and brokerage firms

 

This second type of provider focuses mainly on traditional Wall Street investments such as stocks, bonds, and mutual funds.  Usually, there are limitations to invest in only the products offered by their company.  Hidden fees based on net asset value of the fund often exist. 

 

Typically, there is no Solo 401k loan feature or Roth sub-account available with this type of provider. 

 

Examples:  Chase, Vanguard, Fidelity, Charles Schwab

 

- Self-directed Solo 401k Administrator

 

The third and final Solo 401k provider offers the Self-directed Solo 401k, which gives investment control back to the owner.  This provider names the Solo 401k plan owner as trustee and plan administrator of the plan.  As trustee, the owner directs investments using the plan and can take advantage of almost any investment opportunity.  Funds from the plan can be invested in almost any investment class, such as real estate, notes, private businesses, tax liens and tax deeds, and precious metals.  Typically there are no transaction fees because the owner is performing his or her own transactions.  There are also no delays because the trustee is directing the investments. 

 

Sense Financial Services offers the truly self-directed Solo 401k plan.  This plan offers all possible features and benefits of the plan.  Advantages include:  total checkbook control, investment capability into almost any investment class, high contribution limits, non-recourse funding for real estate investments, loan feature of up to $50,000 for any use, and Roth sub-account for making Roth-type contributions to the plan. For free consultation please call (949)228-9393 or visit: www.sensefinancial.com


Comments (2)

  1. Sharon, Yes, there are certain limitations when using SDIRA to invest. You are not allowed to invest your IRA into prohibited transactions and/or with disqualified person. You can learn more here: http://bit.ly/1lUj0dq You are welcome to contact my office and schedule free consultation to discuss details of your particular situation.


  2. For a SDIRA, arent' there limitations to what an investor can invest in with their LLC? Can you elaborate what those may be? I'm asking because I have a potential partner with funds in an IRA that she wants to use to partner with me (by transferring to a SDIRA), however, if we create our own partnership LLC to take title to the property, will her SDIRA LLC be able to make the down payment? Thanks!