Self Directed IRAs, pros and cons?

[Krystle Stephens]

I am really interested in rolling my 401k into a self Directed IRA. Has anyone done this? How did it go?

[Justin Windham]

@Krystle Stephens

Many BP members use SD IRAs and Solo 401k plans to invest into real estate. If you have self-employment activity, the Solo 401k might be an option for you.

*Compared to an IRA, Solo 401k contribution limits are roughly ten times higher.

*You can borrow up to $50k from the plan; IRAs do not allow participant loans

*There is no custodial requirement for the 401k.

*You don't need the additional expense and administration of an LLC to have checkbook control.

*There is a built in-Roth component whereas IRAs are either traditional or Roth, not both.

*A spouse can also participate in the same Solo 401k plan.

*The Solo 401k has additional tax benefits over an IRA when investing into real estate using leverage.

*The penalties for prohibited transactions are less severe, though it's best not to utilize this benefit :)