Most employer-sponsored 401(k) plans in existence today permit employees to invest only in a limited selection of mutual funds or similar securities. The dismal returns in the stock market over the past several years have caused many people to question the utility of such retirement investments. While many don’t realize there is something else that is available to you that offers far more than a typifcal 401(k) account. A Self Directed 401k is a great option for those wanting more than just a typical selection of mutual funds or similar securities. With your Self Directed 401k (one.K plan), you are finally able to make nontraditional investments while enjoying the great benefits of a 401(k) plan.
- What you can do with a Self Directed 401k (one.KTM plan)
The main benefit to a Self Directed 401k is that it offers the ability to invest in a wide range of investments. Some of the investments you can invest in are:
- Purchase real estate
- Loan to yourself or others
- Buying or starting a business
- Use purchase options on real estate
- Flip properties
- License intellectual properties
- What you can’t do with a Self Directed 401k (one.KTM plan)
Like an IRA, there are certain transactions that are prohibited. The rules, stated simply, do not permit “self-dealing.” You cannot interact personally with your 401(k) account in such a way that you or your 401(k) account can benefit directly or indirectly. Naturally, as the owner of the account, you have a right to direct its investments and you will therefore receive an incidental benefit as a future retirement account beneficiary. But that is the only benefit you can receive from your investments.
For example, you cannot loan money to your account nor receive a personal loan from your account (other than participant loans). It doesn’t matter that the terms are commercially reasonable. The problem is that there could be a conflict of interest in the transaction itself. In other words, if your account loans you all of its funds and you then default, there would be an obvious conflict of interest in you (acting on behalf of your account) trying to “collect against yourself.” The same concept applies to certain family members. Your spouse, your lineal ancestors (parent, grandparents, but not mother/father-in-law), your lineal descendants (children, grandchildren, but not nieces/nephews), and the spouses of your lineal descendants are all considered “disqualified persons” or “parties in interest” and your account cannot transact with any of them for the same reason. The government does not believe you would have your retirement account’s best interest at heart if your 401(k) account needs to collect a bad debt from Grandma or evict your daughter and son-in-law from the house they recently leased from your account’s portfolio!
- What is included in setting up a Self Directed 401k?
The following is what Accuplan Benefits Services provides in setting up a Self Directed 401k. If you would like any more information feel free to contact us direct.
- Creation of 401K plan documents
- Filing of 401K EIN
- Favorable determination letter from IRS
- Complete set of plan documents with all necessary forms and guides
- Assistance and guidance in 401k rollover of current plan to new self directed plan
- Assistance and guidance in setup of checking account
- Unlimited pre and post setup consulting for plan setup and operation
Hopefully you are beginning to see the benefits to a Self Directed 401(k). It really is the same thing as a regular 401k except that you are allowed to invest in more things. If you want to take advantage of investing in real estate, gold or other investments that are outside of the stock markets feel free to contact us today to open an account or to learn more.
Author: Nick Barker