A self directed 401K, is a 401K plan arranged for your company. In your role as leader of the company, you will behave as the legal custodian and trustee, overseeing the plan’s financial dealings. The investments for the 401K plan might be in a broad range of permissible investments. The utilization of this type of self directed 401K enables you to maintain investing and spending control over the 401K.
Traditional 401K plans don’t allow direct possession of real property or other non traditional investments, so investing via the self directed 401K ultimately is the only viable option for these types of investments. Once a Self Directed 401K plan sells real property or liquidates different investments, the income taxes are deferred in the 401K, comparable to any other 401K investment.
Possession of the property in a 401K enables you, the trustee, to direct the investment decisions regarding the 401K assets. You will not have the involvement of a custodian or other hassles, and it won’t matter if the investments are in real estate, securities or in other investment arenas.
A 401K could employ its 401K financial backing as a deposit for a real estate purchase, with the 401K funding or taking over the balance. One can even leverage a 401k by borrowing to help the 401k to make a real estate purchase.
Some of the basic benefits of your self directed 401K plan:
- You can stop investing at any time
- You can borrow money up to the limitations for anything or any reason
- Your spouse can contribute to the 401k
- You needn’t be retired to enjoy a self directed 401K
- Even if you have IRAs already, you can roll them into this type of account
Generally, any small business owner (with no full time employees) is eligible to apply for a self directed 401K plan.