Fidelity doesn't offer SD IRAs: Got Recommendations?

Question

So I have an old 401K I'd like to convert to a SDIRA but Fidelity doesn't offer this.  I'm in Central Massachusetts.  Any recommendations on does out there?

Bernard Chouinard · Answer

Thank you @Justin Windham

Justin Windham · Answer

@Bernard Chouinard

No, contributions to a 401k plan must be sourced from income earned from the adopting employer. If you have a 401k at work, you can contribute money from your W2 job to it. A Solo 401k will have contributions come from income earned from your self-employment.

Although you can transfer previous employer 401k plan funds into a Solo 401k (if you are eligible for one), most plan documents place restrictions on your ability to access the funds while still working with the employer. See if the plan allows for in-service distributions. Most plans won't allow for this, but you may be able to access at least some funds if the plan is uniquely flexible in this regard.

Mark Nolan · Answer

@Bernard Chouinard

I like IRA Services Trust Company too.

Also, have you looked into a self-directed solo 401k?

Following are the similarities and differences between the solo 401k and the self-directed IRA.

The Self-Directed IRA and Solo 401k Similarities

• Both were created by congress for individuals to save for retirement;
• Both may be invested in alternative investments such as real estate,  precious metals tax liens, promissory notes, private company shares,  and stocks and mutual funds, to name a few;
• Both allow for Roth contributions;
• Both are subject to prohibited transaction rules;
• Both are subject to federal taxes at time of distribution;
• Both allow for checkbook control for placing alternative investments;
• Both may be invested in annuities;
• Both are protected from creditors;
• Both allow for nondeductible contributions;
• Both are prohibited from investing in assets listed under I.R.C. 408(m); and
• Neither may be invested in your own business.

The Self-Directed IRA and Solo 401k Differences

• In order to open a solo 401k, self-employment, whether on a part-time or full-time basis, is required;
• To open a self-directed IRA, self-employment income is not required;
• In order to gain IRA checkbook control over the self-directed IRA funds, a limited liability company (IRA LLC) must be utilized;
• The solo 401k allows for checkbook control from the onset;
• The solo 401k allows for personal loan known as a solo 401k loan;
• It is prohibited to borrow from your IRA;
• The Solo 401k may be invested in life insurance;
• The self-directed IRA may not be invested in life insurance;
• The solo 401k allow for high contribution amounts (for 2016, the  solo 401k contribution limit is $53,000, whereas the self-directed IRA  contribution limit is $5,500);
• The solo 401k business owner can serve as trustee of the solo 401k;
• The self-directed IRA participant/owner may not serve as trustee or  custodian of her IRA; instead, a trust company or bank institution is  required;
• When distributions commence from the solo 401k a mandatory 20% of  federal taxes must be withheld from each distribution and submitted  electronically to the IRS by the 15th of the month following the date of  each distribution;
• Rollovers and/or transfers from IRAs or qualified plans (e.g.,  former employer 401k) to a solo 401k are not reported on Form 5498, but  rather on Form 5500-EZ, but only if the air market value of the solo  401k exceeds $250K as of the end of the plan year (generally 12/31);
• When funds are rolled over or transferred from an IRA or 401k to a  self-directed IRA, the amount deposited into the self-directed IRA is  reported on Form 5498 by the receiving self-directed IRA custodian by  May of the year following the rollover/transfer.
• Rollovers (provided the 60 day rollover window is satisfied) from an  IRA to a Solo 401k or self-directed IRA are reported on lines 15a and  15b of Form 1040;
• Pre-tax IRA contributions on reported on line 32 of Form 1040;
• Pre-tax solo 401k contributions are reported on line 28 of Form 1040;
• Roth solo 401k funds are subject to RMDs;
• A Roth 401k may be transferred to a Roth IRA (Note that from a  planning perspective, it may be advantageous to transfer Roth Solo 401k  funds to a Roth IRA before turning age 70 ½ in order to escape the Roth  RMD requirement applicable to Roth 401k contributions including Roth  Solo 401k contributions and earnings.);
• Roth IRA funds are not subject to requirement minimum distributions (RMDs);
• The fair market value (FMV) of assets held in a self-directed IRA is reported on form 5498;
• The fair market value of assets held in a solo 401k are reported on Form 5500-EZ;
• At termination, the solo 401k is required to file a final Form 5500-EZ and 1099-R; and
• At termination, the self-directed IRA is only required to file a form 1099-R.

Carl Fischer · Answer

@Bernard Chouinard

Below are 3 things to consider when selecting a custodian/administrator for a self-directed IRA.

1. Knowledge (They actually know what they are talking about)

2. Customer service (can you reach a person, how quickly?)

3. Ease of transactions

Thanks

Carl

Mark Nolan · Answer

@Bernard Chouinard

If you are still working for the company that sponsors the full-time  employer 401k plan, you may not be able to transfer that 401k unless one  of the following triggering events are met:

• Reaching retirement age. This is usually defined by the plan, and  typically ranges from age 55 to 65; however, the actual retirement age  may vary among plans. As such, the plan must be consulted to determine  its particular requirements and definitions.
• Termination of employment
• Disability
• Termination of the plan
• Death, in which case the distribution would be taken by the beneficiary

However, some current employers may allow for partial or  full-transfers from 401k and profit sharing plans even if one of the  aforementioned triggering events have not been satisfied. These are  referred to as in-service withdrawals. Key factors should be considered  when making in-service withdrawals. These include the following:

• In-service withdrawals are not permitted from pension plans, such as money purchase and defined benefit pension plans.
• In-service withdrawals that are due to hardship cannot be rolled over to an IRA or any other retirement plan such as a solo 401k plan. 
• In-service withdrawals of salary deferral amounts are usually  permitted only under hardship circumstances, whereas in-service  withdrawals of employer contributions need not be limited to hardship.
• Withdrawals cannot be more than the participant’s vested account  balance, and for participants who have participated in the plan for less  than five years, their in-service withdrawal amounts can be further  limited to amounts that have been in the plan for two-years or less.

Get a copy of the Current Employer SPD

One way of determining if your current employer will allow you access  your retirement funds while still working for them, is to check the  summary plan description (SPD) for the existing plan. The SPD is  required to be written in a language or format that is easily understood  by participants. Larger plans usually make the SPD available on the  company’s benefits website. If the SPD is not available, the plan  administrator or human resources department should be contacted for a  copy of the most updated version.

Bernard Chouinard · Answer

@Mark Nolan Couple Q's for you.

If I go Solo 401K can I can I contribute tax free from my W2 job?

Can I role an existing 401K plan for a company I'm still employed for into a solo 401K?

Fidelity doesn't offer SD IRAs: Got Recommendations?

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