Tip:
Highlight text to annotate it
X
Tim: In this video, we’re going to talk about self-directed Solo 401(k)s – what
they are, how they work, and why you might want to get hold of one.
Brian, you’re my expert in this minefield of terminology.
Can you explain to me, what is a self-directed Solo 401(k)?
Brian: Sure.
First of all, I’m very flattered.
Thank you.
But, a self-directed Solo 401(k) is, number one, a Solo 401(k) is for a person who has
self-employment income.
Tim: Okay.
Brian: Number one.
Number two, it’s self-directed as opposed to a traditional.
Whereas in the traditional Solo 401(k), you can typically invest in stocks, bonds and
mutual funds, with the self-directed Solo 401(k), you’re able to invest in a much
broader array of products, such as real estate, precious metals, private placements, tax liens,
etc., etc.
The list really goes on and on.
So, you just have a lot more control in your investment.
Tim: Well, this makes sense to me because I do run my own company, so I’m guessing
I’m a 401(k) guy, and in terms of that, my parents are always telling me, and wealthy
people around me are always telling me, you know, “Real estate, invest in real estate.”
So, I can take my 401(k) money and, through the mechanism of this self-directed Solo 401(k),
I can make those kind of investments outside the traditional, you know, stocks and bonds.
Is that a fair summary?
Brian: That’s correct.
I mean, there are certain stipulations.
Not everyone that has self-employment income can invest in a Solo 401(k).
For example, you’re not allowed to have any full-time employees, people that work
for you who work 1,000 hours a year or more.
So, that would be just one stipulation.
Tim: Okay.
Brian: But, if you are eligible, then absolutely, you’d be able to use the Solo 401(k), invest
in real estate, invest in other products that, frankly, will give you a nice level of diversification
beyond your traditional stock, bond and mutual fund portfolio.
Tim: So, I can do what my parents taught me to do.
Brian: You absolutely could.
Tim: That sounds good.
Brian: For once in your life.
Tim: So, my guess here is that there is some kind of paperwork involved.
There’s always paperwork.
What kind of structure do I need to set up to kind of enable this thing?
Brian: It’s very straightforward.
We would set you up with a plan.
Within that plan, embedded in that plan, is a trust.
You will become the trustee of that trust, and you’ll simply open up a checking account
for that trust at a local bank, and you’ll use that account to basically buy any assets
that the IRS permits you to invest in.
Tim: So, this is all IRS-legitimate, 100% kosher.
Brian: One hundred percent, 100%.
Tim: All right, well, thanks for explaining that.
I appreciate it.
Brian: My pleasure.
Tim: For those of you who’d like to find out more, please visit us online at broadfinancial.com,
or just reach out and give us a call, and we’ll answer all your questions, even the
kind of silly ones that I come up with, and we can help you there.