All Forum Posts by: Dmitriy Fomichenko

@Gautam Venkatesan and @Matt Devincenzo good comments!

One of the major benefits of the Solo 401k plan is that it allows you to take what's called a "Participant Loan". It is a personal loan feature that allows you to access your retirement funds at any time tax free and penalty free! This is not available with self directed IRA. And not all Solo 401k providers offer this feature either, so be sure to check on that before you make a decision who you wish to use.

Now regarding buying investment property in your self-directed IRA or 401k. Matt explained it very well using good example. Sam Leon , if you wish you can pay all cash for a property, or you can use "non-recourse" loan and buy it with financing. Here is a list of lender who will do this kind of loans: http://www.sensefinancial.com/non-recourse-lenders/. The down-payment is typically 30-50%. And again, Matt is correct, property financed in Solo 401k is not subject to UDFI tax (unlike with self directed IRA).

Dawn, if you have to move away from one document sponsor, it is unlikely that new sponsor will accept the original documents and just provide you with the updates. To be compliant, the updates must "fit in" with the original documents. And since original documents where not provided by the new sponsor, they will not work. We are heading into new PPA Restatement period later this year and all current plan documents from any and all sponsors will have to be restated (replaced with the new set of documents) in order for the plan to maintain it's qualified plan status. Make sure that you use the provider who will keep your plan documents up to date, otherwise your entire account is at risk.

@Mike T.

you need to use net income figures for calculating contribution amounts. Here is a link to the 401k contribution calculator that you may find useful:

http://www.sensefinancial.com/services/solo401k/solo-401k-plan-calculator/

@David Beard yes, you can contribute to Traditional IRA (it does not have to be self-directed, save on to set up cost) and then transfer the funds into Solo 401k.

@David Beard I see three reasons why not:

1) Most people can easily create a self-employment activity. But there are those who simply does not want to become a juice distributor (or distributor of something else). Therefore they don't qualify.

2) Someone owns a business with full time employees, therefore they are not eligible for Solo 401k.

3) Someone has current Roth IRA that they wish to invest in Real Estate, and Roth IRA can not be moved into Solo 401k.

I agree with @Steven Hamilton II Jeff and others who commented bringing up Solo 401k benefits. For those who qualify, self directed Solo 401k route is much better than self directed IRA. Several major advantages, but the key point is to qualify for it (not everyone would qualify).

@Steven Hamilton II

@Steven Hamilton IIgood point, leveraged real estate in Self Directed 401k is NOT subject to UBIT! This is just one of the benefits of the 401k over an IRA, among others are: Checkbook control, Roth sub-account allowing tax free investing, access to funds for personal needs via participant loan and some more.

@Greg W.

While self directed IRA will allow you to use your retirement funds to invest in real estate and other non-traditional investments, I want to make sure that you are aware of another option that is available to you: Self-Directed Solo 401k. There are several major advantages of using Solo 401k over self directed IRA. Here are few:

• No need for a custodian (save $$ on transaction and asset based fees)
• Checkbook control - you don't need to ask custodian consent to make the investment, simply write the check
• Roth sub-account - in essence you can have two accounts in one: regular pre-tax as well as Roth after tax
• High contribution limits up to $56,500 per year, this is nearly 10 times more than an IRA. This feature makes Solo 401k great tax sheltering vehicle.
• Participant loan feature - give you the ability to access cash up to $50K in your account at any time for any reason
• Exempt form UBTI tax on leveraged real estate

There is additional info available online if you wish to learn more. Hope this helps you be informed of all the options that are available for you.

Mike, please allow me to clarify your comment. Almost all qualified retirement funds can be rolled over or transferred into self directed Individual K (or Solo 401k). There is only one exception: Roth IRA. If you have funds in a Roth IRA, then those funds can not be moved over to Solo 401k. However, almost all other accounts can. Few examples: Traditional IRA, SEP IRA, Simple IRA, 401k, 457, 403b.

Tawnya,

it looks that you work as a real estate agent (based on your profile description), and while self directed IRA will allow you to use your retirement funds to invest in real estate and other non-traditional investments, I want to make sure that you are aware of another option that is available to you: Self-Directed Solo 401k. If you are self-employed you would qualify for this option and there are several major advantages of using Solo 401k over self directed IRA. Here are few:

• No need for a custodian (save $$ on transaction and asset based fees)
• Checkbook control - you don't need to ask custodian consent to make the investment, simply write the check
• Roth sub-account - in essence you can have two accounts in one: regular pre-tax as well as Roth after tax
• High contribution limits up to $56,500 per year, this is nearly 10 times more than an IRA. This feature makes Solo 401k great tax sheltering vehicle.
• Participant loan feature - give you the ability to access cash up to $50K in your account at any time for any reason
• Exempt form UBTI tax on leveraged real estate

There are few other, but I think the above make the point. There is additional info available online if you wish to learn more.

I think it is very important to make the informed decision (knowing all your options). Wish you the best!