Updated : Oct 12, 2019 in Articles

What is a Self-Directed 401(k) & How Can I Use a Self-Directed 401(k) to Help My Retirement Savings?


Tim: In this video, we’re going to talk
about self-directed 401(k)s, Solo 401(k)s, and how you can use those to invest your retirement
funds. Good day, Brian. How are you today? Brian: Good. How are you, Tim? Tim: I’m well, thank you. I want to talk about self-directed 401(k)s. These are very specific. Tell me, what is a self-directed 401(k) and
what is the self-directed 401(k) eligibility. In other words, who can do this? Brian: Well, it’s really, it’s a self-directed
Solo 401(k), and the eligibility for that is you have to have self-employment income
and you cannot have full-time employees, which is defined as a person working for you that
works more than 1,000 hours per year. Tim: Okay. Brian: Once you have that, then you’re in
a position that you can put away quite a bit towards retirement, and in the case of a self-directed
Solo 401(k), you can have a lot of flexibility in terms of how you invest those retirement
funds. Tim: So, I want to talk about this, to be
really detailed here, a Solo 401(k) and a self-directed 401(k), they’re two different
things, kind of. How do those two things connect? Brian: Well, a Solo 401(k) is simply the type
of 401(k) that a person who’s self-employed can invest in. Tim: Okay. Brian: The self-directed Solo 401(k) is just
taking that plan and putting it on a platform, so to speak, that enables you to go beyond
traditional types of retirement plans. So, you can invest in things beyond stocks
and bonds, mutual funds, and the like. Tim: So, normally, people who’ve got that
Solo 401(k), they’re doing stocks and bonds, mutual funds, etc. The moment you get this self-directed mechanism,
now you start being able to do Solo 401(k) real estate investing. Brian: Exactly. Tim: Or Solo 401(k)… What else can you invest in? Brian: Precious metals, you can invest in
private placements and tax liens, private loans. Really, the list goes on and on. I mean, people would be absolutely surprised,
and most people are surprised, at the amount of asset classes that the IRS permits you
to invest in. Tim: So, and this is really interesting to
me… So, if I’m putting together a Solo 401(k)
retirement plan for a sole proprietor, for example, who is eligible, I believe? Brian: Right. Tim: What kind of plan would you put together? What kind of options would you have them consider? Brian: Well, first of all, I mean, in the
case of the sole proprietor, that person would be eligible as long as they don’t have any
full-time employees. That’s important to always point out. Once we would set that person up with a plan,
and within the plan, there is embedded within the plan, is a trust, and that person is now
going to be named the trustee of that trust. They’re simply going to open up a checking
account at a local bank, and now they’re free to invest in whatever the IRS permits
them to. So, if they want to buy a rental property,
they can certainly do that. They want to buy precious metals, as I mentioned,
or the vast array of private placements, whether it’s hedge funds, private equity funds,
or what have you, all of those doors are now open to that investor. Tim: Well, I’ve got to say, particularly
for me as a small business owner, and I have been a sole proprietor in the past, I felt
like a very kind of do-it-yourself kind of person, so I could see how suddenly being
able to take back control of your IRA would make a lot of sense to people in this circumstance. Brian: Absolutely. Tim: Well, thank you for sharing that. I appreciate it. It’s kind of a mind opener for me to even
know it’s possible, let alone, thank you for laying out the specific steps. For those of you who’d like to find out
more, please get in touch with us at broadfinancial.com, or just give us a call and reach our customer
care team who’d love to answer all of your questions and help you set up the appropriate
self-directed Solo 401(k).

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