Question: Why a SDIRA instead of a Solo 401K (checkbook)? If the goal is to be in control of how your $ is invested, wouldn’t a Solo 401K make more sense and save $?
Jason Bhattacharya: Please share more… I’m not familiar with the solo 401k
Patricia Holland Bowler: From what I understand, there is no third party, therefore, no fees. Sounds like an advantage to me. I’m hoping someone can weigh in and let us know if there are disadvantages, as well. Anyone?
Jason Bhattacharya: I’d love to hear about that! However, my concern would be the risk of comingling of funds– and the penalties as such? But I too would like to hear the experts!!
Keith Maynard: Patricia, my understanding is that you can not invest/hold real estate in a 401k plan, but you can make transfers or take loans against your 401k to access the funds for investment.
Jim Ingersoll: Good discussions. One reason not to go with checkbook control is the Prohibited transactions. You don’t want to accidentally do one and open yourself up the consequences that result
Keith Maynard: Patricia, Jim Ingersoll brings up a very good point.
Patricia Holland Bowler: Interesting because I know someone who is purchasing real estate with her solo 401k. Maybe I misunderstood or they don’t know they can’t do it? I’ll have to inquire because I’m curious now.
Keith Maynard: I think a person can loan themselves money to purchase real estate from their 401K. It must be repaid in a certain number of years, and with interest. I think the repayment is 5 years.Here is a link to the IRS that may help.http://www.irs.gov/…/Retirement-Plans-FAQs-regarding…
Jim Ingersoll: There is checkbook control available for self directed IRA’s but account owners need to be careful. A better way to do is with an IRA trust and a trustee, just know it is a more paperwork. The nice thing about using an IRA trust is it removes you from the public record as a “lender”. People can search public records for the “FBO” and find your account information. With an IRA trust this disappears. With a good custodian, Like Quest IRA, Inc. the money transfers for closing and EMD are very fast and easy so if speed is a consideration, the checkbook control doesn’t buy you much of it. Thoughts?
Patricia Holland Bowler: I thought it sounded like a great way to avoid the fees. Guess I’ll have to continue with the research on this one! Thank you all for weighing in.