You would probably assume that the most important benefit associated with a self-directed 401(k) would be the new-found freedom and flexibility you will have in investing in assets in which you have a high degree of comfort and interest.
And, you would be correct. However, when you think of a self-directed 401(k), you also want to keep in mind a vast array of additional benefits other than just that freedom and flexibility. You are now operating a plan that provides for maximum contributions (far more than an IRA) and provides other unique benefits that your standard IRA will not have.
This ain’t your father’s 401(k)!
Some of the benefits you will experience with your Self-Directed 401(k) include:
1) Freedom of Investments – Want to invest in any asset not prohibited by IRS and DOL regulations…now you can! The power of investing into non-traditional assets and not just being limited to investing into traditional assets that your broker recommends. You can invest in more than what Wall Street is offering you!
2) Diversification – You have it with the Fulcrum Self-Directed 401(k)! Why be limited to diversification within the world of stocks, bonds and mutual funds? Doesn’t your definition of true diversification surpass mutual funds? Don’t you think that you should have a menu of investment choices that is not limited? You can!
3) Control – You are the 401(k) Trustee, not some other individual or company. You can dictate the operation of your plan and the investments you have to choose from.
4) Protection – your retirement plan again market fluctuation and volatility. Why rely solely on your broker to protect your retirement funds from such volatility?
5) Investing with others? – You can! While one must follow all IRS Prohibited Transactions, you now have the ability to invest with others…certain family members, friends, business associates and strangers.
6) Rollovers and Transfers – Did you know that, general speaking, you can rollover or transfer practically any other retirement plan funds into your new 401(k)?! You can! One notable exception is the impermissibility to rollover Roth IRA funds. However, the ability to rollover or transfer practically any other retirement plan funds into your 401(k) gives you immediate funding for your plan and the investment activities of the plan.
7) Contributions – Not only can you make a high level of contributions (up to potentially $57,500), you can make contributions in both a pre-tax (traditional) or after-tax (Roth) manner….or even a combination of the two. Being the self-employed participant of your Solo-K plan, you can decide the tax-favored manner in which you make your contributions.
8) Plan Loans – Have the freedom and flexibility to take participant loans from the plan. Sure, there are IRS rules (think of duration, interest rate, etc.) to be followed, but YOU have the freedom to make that choice. Borrow up to $50,000 or 50% of the account balance (whichever is less) for any purpose you desire.
9) No Custodian Fees – As you may already know, a self-directed IRA will have custodian fees associated with the IRA LLC. With you self-directed 401(k) plan, you will avoid a custodian fee.
10) Other Plan Benefits – There are many. 401(k) plan benefits were intended for to provide extensive benefits to an employer sponsored plan. With the individual, self-directed 401(k) plan, you have a tremendous amount of benefits, including asset protection.
Here is a powerful message. If you qualify for an individual 401(k) plan, why would you not want to self-direct the plan?! From one account, you now have the ability to have “check book control” of your retirement assets and invest in both traditional and non-traditional assets. No need to have separate accounts. The full ability to invest in assets you have a high comfort level with. No more being limited and confined. No further need to pay a broker for their services….unless you want to!
In establishing your self-directed 401(k) through Fulcrum Self-Directed, you have all of these benefits available to you!