The next thing you need benefits and the solo 401K above and beyond the self directed IRA in my opinion is the most significant. There is no special trustee requirement. Now when you look at the internal revenue code, you’ll see that an IRA is a trust and the 401K is also a trust but they are governed by different sections of the internal revenue code and the section for a way that governs IRA’s. It says, the trustee must be a bank or trust company and if you’re unfamiliar with trust companies, they are essentially—I’d say, imagine a trust company as a bank who takes deposits and holds assets but doesn’t loan money out. Trust companies are regulated by the banking industry.
401K is a trust but there is no restriction its internal revenue code section 401 that defines a 401K and the trustee can be anybody.
Again an IRA must have a banker or a custodian as trust company and the disadvantage is potentially to that kind of arrangement is the transaction processing time, as well as the fees. Fees can be sometimes percentage based and or transactional, sometimes both and a custodian can average strict of company policies which leaves you with no longer the unlimited choices that you may be pursuing if you’re interested in self directed investing towards alternative assets such as real estate, private companies, precious metals, etc.
So in the IRA world, a lot of people have been very well coming of the concept of the IRA LLC and the IRA LLC aims to give check book control to the IRA account holder by essentially opening an IRA at a self directed custodian, creating an LLC with the special purpose of being owned by the IRA and managed by the IRA account holder and then the account holder directs the custodian to invest the IRA funds in the LLC and the LLC further invests into assets without involvement from the custodian.
In this scenery the custodian rolls significantly reduced so the delays of transacting are eliminated and some of the fees are eliminated or reduced.
With the solo 401K, instead of having to go in somewhat of around about way to obtain that direct control of the assets, there is a much more direct control through naming yourself as a trustee of your solo 401K.
So in this type of scenario, the solo 401K is established and it’s simply invest directly into the assets that you wanted to purchase and you are the signer on the account, you are the decision maker, you don’t; have to go to any third party and wait for them to react and pay them fees to do so.
This is extremely simple. Now, compared to the IRA LLC, this scenario eliminates the LLC set up cost, eliminates the LLC accounting eliminates the LLC taxation that is required in some states.
So over all the solo 401K in my opinion is the most powerful wealth building tool available to Americans today. You can contribute large amounts of money, grow them tax deferred, you can have direct control over those assets and you can have unlimited choices in what you want to invest in.
If you’re interested in the solo 401K or have any questions about solo 401K offer by Nabers Group, feel free to give us a call at 877-solo-401K, again that’s 877-solo-401K.
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