The Solo 401k checkbook control structure simplifies how you can purchase investments. By establishing a bank account for your plan, you can write a check, use a debit card, or wire funds on the spot.
Solo 401k Retirement Plan
A Solo 401k is perfect for sole proprietors, small businesses, and independent contractors.
A Solo 401k plan is generally also referred to as a “checkbook control” Qualified Retirement Plan. In each case, a 401(k) plan is established whereby the participant serves as trustee and administrator of the Plan providing the participant with “checkbook control” over his or her retirement funds.
With a “checkbook control” structure you will never have to seek the consent of a custodian to make an investment or be subject to excessive custodian account fees based on account value and per transaction.
By having “checkbook control” over your retirement funds you will gain the following advantages:
Solo 401(k) with “Checkbook Control”
You’ll no longer have to get each investment approved by the custodian of your account. Instead, all decisions are truly yours. To invest, simply write a check and use the funds straight from your Plan bank account.
When making a real estate investment or purchasing tax liens, a “checkbook control” Solo 401k Plan, will allow you as manager of the LLC the ability to simply write a check from your Solo 401k Plan bank account.
Example 1
Joe has a Solo 401k set-up by the IRA Financial Group. Joe has established his Plan bank account with Bank of America. Joe wishes to use his retirement funds to purchase a home from Steve, an unrelated third-party (non-disqualified person). Steve is anxious to close the transaction as soon as possible. With a “checkbook control” Solo 401k Plan, Joe can simply write a check using the funds from his 401(k) Plan bank account or can wire the funds directly from the account to Steve. Joe, as trustee of the plan, no longer needs to seek the consent of the custodian before making the real estate purchase. With a custodian controlled Plan without “checkbook control” Joe may not be able to make the real estate purchase since seeking custodian approval would likely take too much time.
Example 2
Joe has a Solo 401k set-up by the IRA Financial Group. Joe has established his Plan bank account with Bank of America. Joe wishes to use his retirement funds to invest in tax lien certificates via auction. Purchasing tax lien certificates requires Joe make the payment at the auction. With a “checkbook control” Solo 401k Plan, Joe can simply bring his 401(k) Plan bank account checkbook to the closing or secure a certified check from the bank in order to make payments at the auction. With a custodian controlled Solo 401k Plan without “checkbook control” Joe would not be able to make tax lien certificate investments because he would need custodian approval before each tax lien certificate purchase and would not have sufficient time to seek the consent of the custodian.
Learn More: Tips for Making Investments with a Solo 401(k) Plan
No Custodian Fees or Transaction Fees
The most significant cost benefit of the Solo 401k plan is that it does not require the participant to hire a bank or trust company to serve as trustee. In other words, there are no custodian fees or transaction fees when establishing a Solo 401k Plan with the IRA Financial Group. This flexibility allows the participant to serve in the trustee role. This means that all assets of the 401(k) trust are under the sole authority of the Solo 401k participant. The plan allows you to eliminate the expense and delays associated with an IRA custodian, enabling you to act quickly when the right investment opportunity presents itself.
Related: Difference Between a Solo 401(k) and a Roth Solo 401(k)
Speed
You can act quickly on a great investment opportunity. When you find an investment that you want to make with your retirement funds, simply write a check or wire the funds straight from your Plan bank account to make the investment. The Solo 401k Plan allows you to eliminate the delays associated with using an IRA custodian, enabling you to act quickly when the right investment opportunity presents itself.
Offset the Cost of Your Plan with a Tax Deduction
By paying for your Solo 401k with business funds, you would be eligible to claim a deduction for the cost of the plan, including annual maintenance fees. The deduction for the cost associated with the Solo 401k Plan and ongoing maintenance will help reduce your business’s income tax liability, which will in-turn offset the cost of adopting a self-directed Solo 401k Plan. The retirement tax professionals at the IRA Financial Group will help you take advantage of the available business tax deduction for adopting a Solo 401k Plan.
Cost Effective Administration
In general, the Solo 401k plan is easy to operate. There is generally no annual filing requirement unless your plan exceeds $250,000 in assets, in which case you will need to file a short information return with the IRS (Form 5500-EZ).
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