WHAT
IS A SELF-DIRECTED 401(k)?
What
is a self-directed 401(k)?
A self-directed 401(k) is really no different than the
401(k) you might have no except rather than having to
buy the limited funds offered to you by most custodians,
a self-directed 401(k) allows you to invest in a lot
more... even real estate, tax lien certificates,
private mortgages, and trust deed investments! A
self directed 401(k) (just like a self-directed IRA)
is very unique because of the available investment options.
Most custodians only allow approved stocks, bonds, mutual
funds and CDs. A truly self directed custodian allows
those types of investments in addition to real estate,
notes, private placements, tax lien certificates, private
mortgages, and trust deed investments, and much, much
more.
What
about a self-directed 403(b) plan?
Since the 403(b) functions exactly like a 401(k),
they fall under the same guidelines as self-directed
401(k)'s. Currently, while there are no custodians that
allow for a truly self-directed 403(b) account, the
IRS does allow for all monies in a 403(b) plan to be
rolled over into a self-directed 401(k) account with
any self-directed custodian. Problem solved!
What
about a self-directed Roth 401(k)?
YES!!!!!!!!!!!... just like the IRA and Roth IRA, both
the 401(k) and Roth 401(k) can be used in a self-directed
manner. The self-directed Roth 401(k) and self-directed
Roth IRA are some of the most powerful tax-free
wealth building vehicles available.
Why
haven’t I heard of a self-directed 401(k) accounts
before?
While the concept of investing in real estate
and other assets in retirement plans has been around
for more than 30 years, the concept hasn’t received
large attention because most custodians who offer 401(k)
accounts focus on mutual funds and CDs because they
have vested financial interests in you selecting those
investments from them.
Because
the majority custodians focus on stocks and CDs there
is a misperception that that is your only investment
option for retirement plans, which is not the case.
My
CPA, attorney, or financial advisor hasn’t ever
heard of a self-directed 401(k), what should I do?
We will be glad to introduce your professional
advisor to our team and our legal representation to
help them understand what it is you are trying to accomplish.
A trusted advisor who has not heard of self directed
401(k) accounts is not an entirely uncommon experience,
given their relatively unknown nature. Please contact
us by clicking here.
Can
I be assured that self directed 401(k) accounts are
allowed under IRS rules?
As long as you follow relevant rules the answer is yes.
There are specific rules regarding self-directed 401(k)
accounts that you should be familiar with to ensure
compliance. There are certain types of transactions
that you can not perform through. Most importantly,
the IRS prohibits “self dealing,” which
are investments in which you or your family members
of lineal descent have prior ownership. For more info
call our offices.
Are
my self-directed investments guaranteed?
No investment (aside from FDIC-insured deposits) is
guaranteed and self-directed investing is not for everyone.
However, most successful investors feel that the investment
risk in assets they know and understand is much less
than that associated with investing solely in conventional
401(k) plans.
DISCLAIMER:
WN Funding or its affiliates hold
no licenses for financial planning and WN Funding is
not a registered security with the Securities &
Exchange Commission.
None of the information on this website should be
viewed as tax or legal advice. Please be sure to consult
your attorney, accountant, and/or other licensed professional
needed before considering any investment or conversion.
|
