A type of Solo 401k, but for the self-employed, self-directed 401k can be invested in alternative investments such as precious metals, real estate, tax liens, promissory notes, commodities, private company shares, as well as equities by writing a check, hence why it's ofter called self-directed 401k checkbook control.
How to gain access to Self-Directed 401k
Gaining access to self-directed 401k is easy. You only have to be self-employed, whether full-time or part-time, and have no full-time employees, defined as those working under 1,000 hours per year.
How to open checkbook Self-Directed 401k brokerage account at Fidelity, Schwab, E-TRADE and Ameritrade
Provided you use a company such as www.mysolo401k.net as your self-directed 401k provider who can facilitate the establishment of your self-directed 401k brokerage account with checkbook control or conversion of existing Solo 401k or Individual 401k to self-directed 401k with checkbook control at Fidelity, Schwab, E-TRADE or Ameritrade, gaining control over your self-directed 401k funds is beneficial, convenient and cost-effective.
Here's how it works:
Your new self-directed 401k provider will be a company such as MySolo401k.net, not Fidelity, Charles Schwab, E-TRADE or TD Ameritrade. Instead these brokerage firms role is simply to provide brokerage account for your self-directed 401k. In other words, under this arrangement, neither Fidelity, Charles Schwab, E-TRADE nor Ameritrade will be responsible for administering, act as fiduciary or trustee of your self-directed 401k. Instead, you will serve as the trustee, administrator and fiduciary of your self-directed 401k.
Once your self-directed 401k brokerage account with checkbook control is opened, your Self-Directed 401k gains following options:
- Checkbook control for investing self-directed 401k in alternative investments such as real estate, precious metals, tax liens, private equity, promissory notes, etc.
- Option to still invest in equities
- Option to Solo 401k loan--borrow up to 50% of your balance not exceed $50,000. Note that your self-directed 401k provider, not Fidelity, Schwab, E-TRADE or Ameritrade will prepare the Solo 401k loan documents, and you will be responsible for administering the self-directed 401k loan.
- As trustee of the self-directed 401k, you will safe keep the documents in connection with the alternative investment purchases. For example, if your self-directed 401k invests in real estate, you, not Fidelity, Schwab, E-TRADE or Ameritrade will safe keep the purchase documents such as the recorded deed, not the brokerage form.
- The neither the alternative investment purchases nor assets will be reflected in your brokerage account statement because Fidelity, Schwab, E-TRADE and Ameritrade are not serving as Trustee nor custodian of your self-directed 401k alternative investments; instead, you are. Simply put, under the self-directed 401k with checkbook control feature, Fidelity, Charles Schwab, Ameritrade or E-TRADE will only serve as the brokerage account provider not the self-directed 401k with checkbook control provider.
Fidelity Self-Directed 401k
Schwab Self-Directed 401k
E-TRADE self-Directed 401k
TD Ameritrade Self-Directed 401k
Self-Directed 401k Do's and Don'ts
Self-Directed 401k Loan Facts