Who has the self directed 401K, not ROTH??

Question

After reading Amanda Han's book she mentioned how different the ROTH and 401k was, especially for us as investors. Looking for the directed 401k??? Have not found many places that will be a custodian for them and am also hearing that can be quite expensive to have. Thoughts? Experience? Referrals?

TIA

Linda Weygant · Answer

I have a solo 401k plan through Equity Trust.  I chose them because they require a custodian, which is actually best for me.  There are so many rules about what can and cannot be done in a retirement account and I like the stop gap between me and a whole lotta trouble, which is what the custodian does for me.

While I would love the flexibility of being completely self managed, I also love having somebody else make sure I'm not engaging in a prohibited transaction or otherwise putting my entire 401k investments at risk.  It would really suck for me to have an unintentional distribution event.

But that's just me.  If you're convinced that you won't put your retirement plan at risk, then one of the other companies that allow more control are awesome.

Daniel Dietz · Answer

@Scott Walther we, my 2 partners and I, have Self Directed Solo401Ks we set up through @Dmitriy Fomichenko at Sense Financial and have been very happy with the service, knowledge and simplicity.

There are several other Plan Providers here on the forums also who could give you great service - just take a look at everyone's 'signature lines' when they post and it is pretty clear who they are - they are not allowed to outright solicit business in this part of the forums, so they are just very helpful and informative and hope we will take notice and inquire directly with them.

We are each our own 'custodian'. MUCH simpler that dealing with our SDIRAs that we have with another provider who uses a third party custodian. Also much easier bookkeeping and taxes IF you are borrowing in either kind of account.

You DO need to have self employed income to qualify for a SOLO401K. IF a person qualifies for a SOLO401k to my knowledge there is not really any reason to use a SDIRA. Our SOLO401Ks are all Traditionals and not ROTH-SOLO401Ks. We can do what I believe is called an 'in plan conversion' similar to how you would convert a traditional IRA to a ROTH when it is outside of a Self Directed account at any point in the future if we choose also.

Dan Dietz

Dmitriy Fomichenko · Answer

Scott, you are correct, truly self-directed Solo 401k plan is much more advantageous comparing to SD IRA. But the catch is that it is not for everyone, you must be self-employed or own a small business without employees in order to qualify for it.

Scott Walther · Answer

@Elizabeth Wilson- Thanks! I should have been more specific, which I just edited. Looking for the self directed 401k.  I did have a ROTH at one time and the stipulations were too tight. From what Amanda's book says,  the 401k has so many more advantages!!! I will see if I can find a picture of the graph and post it. She has a comparison of the Roth vs 401

George Blower · Answer

@Scott Walther

You can either open a solo 401k with a traditional custodian or with a solo 401k plan document provider. If with the latter, you can choose where to have the funds held at and can place investments by writing a check.

Randy Craven · Answer

Great discussion. I think it depends on each person as what works best. I started with a solo401k, but for me felt more comfortable with someone else, a stop gap as Linda indicated so I have moved my funds over to Quest. Granted I don't have as much control, but I'm okay with that.

Carl Fischer · Answer

@Scott Walther

I agree with most of the answers, a solo 401(k) is a great retirement plan!

First, you must qualify for a solo 401(k).

Second, you can choose to have a custodian or not have a custodian. I know companies that offer both options. The main reason some investors choose to have a custodian hold their solo 401(k) is mainly for record keeping on the account. When you go with out a custodian, you need to make sure your CFP/Accountant knows what you are doing and how to file properly for the account.

Bernard Reisz · Answer

@Scott Walther

In contrast to IRAs, Solo 401k plans don't require a custodian. Therefore, having direct control of funds within a Solo 401k is more easily achieved.

Dmitriy Fomichenko · Answer

Scott, what @Daniel Dietz meant is that you are in total control of your retirement monies when you use truly self-directed Solo 401k plan. Unlike self-directed IRA which requires a custodian (a middle-man between you and your IRA funds), Solo 401k plan does not require a custodian. There is no custodian with the plan that Dan has. Instead, we created a trust that is part of his Solo 401k plan which is used to hold plan assets, Dan is the trustee and has total control over how those funds are invested.

Scott Walther · Answer

@Daniel Dietz. How are you your own custodian? I am confused by that. I just met with a new CPA firm today that is local and they did not mention that was even a possibility

Who has the self directed 401K, not ROTH??

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