Can I Have a Self Directed IRA and a Solo 401k?
When it comes to retirement investments, the IRS imposes some stringent restrictions. You cannot invest in collectibles (unless they meet specific purity standards) or life insurance products.
Solo 401k plans provide an ideal way for self-employed individuals and small business owners to invest in alternative assets like real estate, promissory notes, tax liens and precious metals.
What is a Self-Directed IRA?
As its name implies, a self-directed IRA allows you to choose your investments yourself rather than being limited by what’s offered at online brokerages – in particular stocks, bonds, funds and mutual funds. Also eligible investments include real estate purchases, promissory notes and tax lien certificates.
But, you should proceed with caution, as the IRS has strict rules and guidelines relating to your IRA that must be strictly observed. Any unlawful transactions could incur significant fines.
Royal Legal Solutions’ team of experts can guide you through this process to help find investments best suited to your future! Let us guide your investments today.
How to Open a Self-Directed IRA
Self-directed IRAs may give more investment flexibility than employer-sponsored plans, but it is crucial that you abide by all applicable rules and avoid prohibited transactions. Seek financial advice from trusted sources – SmartAsset offers free advisor matching tools which connect you with credible advisors who can assist with finding profitable investments for your self-directed IRA.
Solo 401(k) plans can be an ideal option for self-employed individuals with part-time income from another job as well as W-2 wages from a corporation, offering flexible contribution limits, tax deductible traditional contributions (traditional) and tax free Roth contributions (Roth) plus exemption from unrelated business taxable income (UBTI) when investing in real estate or private financing, not to mention stronger creditor protection than individual retirement accounts (IRAs).
How to Roll Over a Self-Directed IRA
Self-directed IRAs give you the flexibility to invest in assets not available through traditional custodians, including real estate and tangible alternative investments that don’t incur the same fees that traditional or Roth IRAs do.
To initiate a rollover, simply contact the custodian of your current IRA and request a distribution form. Next, ask him or her to transfer your funds into a self-directed IRA LLC structure; this gives you the flexibility and control over investing your retirement funds in assets like private company stock or tax liens.
To ensure that the transfer is carried out efficiently, consult with an experienced and knowledgeable advisor. Furthermore, familiarize yourself with IRS’ rules and guidelines as to avoid incurring severe penalties upon retirement if engaging in prohibited transactions.
How to Transfer a Self-Directed IRA to a Solo 401k
Self Directed IRAs enable investors to invest in alternative assets like real estate, mortgage notes, private loans and tax liens without being restricted by traditional bank IRAs – however their investment options are restricted due to being managed by an specialized IRA custodian who offers more control.
Solo 401k plans allow investors to use retirement funds to invest in various real estate investments such as apartment buildings, mobile homes and raw land without incurring fees and complex record keeping for each transaction. Furthermore, these investments are exempt from UDFI/UBIT on income generated from debt leveraged real estate transactions – making this plan very appealing for investors looking for real estate using retirement funds; but be wary that following all rules could incur severe IRS penalties!