What is a Self Directed Solo 401k ?

What is a Self-Directed Solo 401k? | Solo 401k | Self 401k

Neither The Solo 401k provider nor its attorney/lawyer approves the Self-Directed Solo 401k. Instead, all 401k plans including Self-Directed Solo 401k are approved by the IRS through the issuance of an approval plan letter. In other words, Self-directed Solo 401k is simply another name used to refer to a 401k for the owner-only business.

Furthermore, the term self-directed solo 401k is commonly used in the retirement account industry to refer to a Solo 401k that can be invested in alternative investments such as precious metals (gold, silver), real estate, notes, businesses, tax liens, etc.

What's more, a self-directed Solo 401k comes with a checkbook control feature commonly referred to as 401k checkbook control because it allows the Solo 401k trustee to place investments by writing checks from the Solo 401k checking account.

However, only certain Solo 401k providers allow for checkbook control, and firms like Fidelity, Schwab, TD Ameritrade, and  E-Trade do not allow for it through the use of their Individual 401k documents, but will allow it through the use of a Solo 401k provider's documents.  Therefore, make sure to Open Solo 401k with a Solo 401k  provider that can assist you in establishing brokerage account at Fidelity, Charles Schwab, TD Ameritrade or E-Trade with checkbook control if you are still wanting to invest in equities in addition to alternative investments.  

All other features that apply to Solo 401k also apply to self-directed Solo 401k.

• For the self-employed with not full time employees;
• Annual contributions include profit sharing and employer contributions;
•  Contribution limit is $50,000 for 2012 plus catch-up amount of $5,500 for those age 50 or older ) totaling $55,500;
• If self-employed (part-time or full-time) you can contribute to Self–Directed Solo 401k as well as your full-time day job 401k. However, you cannot exceed the annual $50,000 contribution limit between both plans for 2012, for example;
• You can borrow-take a loan (Solo 401k Loan); up to 50% of account value not  to exceed $50,000;
• Self-Directed Solo 401k requires adopted in writing (e.g., prototype plan);
• The business owner is generally the named trustee of  his Self-Directed Solo 401k plan;
• Annual Form 5500-EZ is filed yearly after account exceeds $250,000 in value;
• Final 5500-EZ is also filed when Self-Directed Solo 401k is closed;
• Any business type can open self-directed Solo 401k—for example, LLC, Sole Proprietorship, S-Corporation, C-Corporation, LP, Partnership as long as you are self-employed with no full time employees.