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An Overview of the Self Directed 401K

The Self Directed 401K Plan, also known as the Solo 401K or Individual 401K Plan is a qualified retirement plan specifically created by the IRS to provide a cost effective tax advantageous plan for the self-employed.

A Self Directed 401K Plan is an IRS approved plan that provides the self employed business owner the ability to make high contribution ad well as use his or her retirement funds to make almost any type of investment, including real estate, tax liens, private businesses, precious metals, and foreign currency on their own without requiring custodian consent tax-free! In addition, a Self Directed 401K Plan will allow you to borrow up to $50,000 or 50% of their account value; whatever is less, for any purpose. A Self Directed 401K Plan is perfect for sole proprietors, small businesses and independent contractors. Plus, a Self Directed 401K plan offers the same advantages as a Self Directed IRA LLC, but without having to hire a custodian or create an LLC.

A Self Directed 401K plan is well suited for businesses that either do not employ any employees or employee certain employees that may be excluded from coverage. A Self Directed 401K plan is perfect for any sole proprietor, consultant, or independent contractor.

One of the primary advantages of using a Self Directed 401K Plan versus an IRS is that while an IRA only allows a $5,000 contribution limit (with a $1,000 additional “catch up” contribution for those over age 50), a plan participant of a Self Directed 401K Plan can make annual contributions up to $49,000 annually with an additional $5,500 catch up contribution for those over age 50.

In addition, while an IRA offers no participant loan feature, the Self Directed 401k Plan allows plan participants to borrow up to $50,000 or 50% of their account value (whichever is less) for any purpose, including personal or business investments, or anything else. The Self Directed 401K loan does have to be paid back over a five year period at least quarterly at a minimum prime interest rate as per the Wall Street Journal (you have the option of selecting a higher interest rate).

Yet another advantage of choosing the Self Directed 401K Plan is that the Self Directed 401K Plan contains a built in Roth sub-account which can be contributed to without any income restrictions. Moreover, the Self Directed 401K Plan is easy to operate. There is generally no annual filing requirement unless your Self Directed 401K Plan exceeds $250,000 in assets, in which case you will need to file a short information return with the IRS (Form 5500-EZ).

To learn more about the benefits if using a Self Directed 401K Plan, please contact a Self Directed 401K expert at 800-472-0646 or visit www.irafinancialgroup.com.

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Posted in Solo 401(k)

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