Bank Accunt or Brokerage Account Self-Directed Checkbook Solo 401k

Even though, the solo 401k business owner can serve as trustee of his or her own solo 401k plan, the liquid funds have to be held with an approved depository taking institution. Most self-directed solo 401k owners will either use a bank or a brokerage firm to hold the liquid cash, which can then be invested in real estate, notes, tax lines, or metals, as well as solo 401k participant loans by either writing a check or by processing a wire. 

Both the brokerage and bank account options have similarities and differences. 

The Similarities

• Because the solo 401k owner is the trustee of the solo 401k account, both the brokerage and bank account come with a checkbook for placing alternative investments such as real estate, tax liens, notes, metals, and private shares to name a few. 
• Solo 401k participant loans can be processed from both. 
• The solo 401k owner not the bank or brokerage firm safe-keeps the investment paperwork (e.g., record deeds and private share certificates).
• The solo 401k owner not the bank or brokerage firm safe-keeps the solo 401k participant loan documents.
• The solo 401k owner serves as trustee of the plan not the bank or the brokerage firm. 
• The solo 401k owner with the help of the solo 401k provider perform reporting under the plan (e.g., filing for Form 1099-R and Form 5500-EZ).
• The solo 401k provider no the bank or brokerage firms process the solo 401k plan amendments and updates. 

The Differences

• The brokerage account allows for both investing in alternative investments by writing a check or by wire as well as investing in stock and mutual funds. The bank account only allows for check-writing/wires not stock or mutual fund investing.
• The brokerage firm does not charge account holding fees whereas the bank generally does. 
• While a solo 401k plan cannot obtain credit card but can obtain a debit card, the bank will issue a debit card whereas the brokerage firm will not. 
• Banks will allow for cashier checks, which is vital for investing in tax liens, whereas not all brokerage firms will issue cashier checks. The only one that currently does is Schwab. 

To learn more about the solo 401k, CLICK HERE.