Self-directed IRA question

[Jeff Caravalho]

Hello BP,

I'm looking to roll some of my IRA into a self directed or solo 401k. I read that fees can vary quite a bit. I was wondering if I could get some opinions on rock solid companies with low fees. Right now I'm interested in what fees they typically charge & why. Also, what does your money do in a SDI while it's waiting to be invested? If there are any other issues I should think about when selecting a company, please let me know. I am self employed. Thanks a bunch.

[Brian Eastman]

@Jeff Caravalho

Firstly, I'm not a neutral source on this topic as my company provides self directed IRA and 401k plans offering checkbook control.

I wanted to comment with the simple aim of painting the background.  There are a lot of different types of plans with different applications based on your employment situation, funding level, investment goals, etc.  So, there is no simple answer as to best plan, best company, etc.  You will want to identify a few quality companies by researching here on BP and then chat with 2-3 at least.

For static investments such as a single note or private stock, a custodian held account can be cost effective (Trust companies).

If you will have a more interactive and time sensitive set of assets in your plan, a plan that offers checkbook control like the IRA LLC or Solo 401k will provide a more responsive platform. These plans are more expensive to establish, but will likely save you money over time through the elimination of transaction and asset based fees typically charged by a custodian.

The difference between the IRA LLC and Solo 401k has more to do with your situation. As a self employed person, you may qualify for the SoloK if you do not have any full time employees or plans for such in the near future. This distinction is where a conversation with an expert will be most helpful to identify the specifics of your needs and goals.

And, this field is like many things... a service where you get what you pay for.  Price is important, and there is not always a direct correlation between price and service, but for the most part you will find that quality, ongoing advisement for your plan will cost more than a set of documents and a pat on the back, or worse, promises of support that will turn out to be lacking in the long term.

Get references.

Check any plans you have with your CPA or other independent advisor before proceeding.

Good luck as you start your research. Self directed IRA and 401k plans can be a fantastic wealth building and tax sheltering tool!