Self-Directed 401(k)

• What is a self directed 401(k)?
• What are the benefits of a self directed 401(k)?
• Why haven’t I heard of a self directed 401(k) before?
• My cpa/attorney/financial advisor hasn’t heard of a self directed 401(k), what should I do?
• Can I be assured that self directed 401(k)s are allowed under IRS rules?
• Are there special rules I need to follow for self directed 401(k) investments?
• Are my self directed 401(k) investments guaranteed?
• Are self directed 401(k)s for everyone?

What is a self-directed 401(k)?

A self-directed 401(k) is technically no different than any other 401(k) or IRA. It's unique because of the available investment options.

Most custodians only allow approved stocks, bonds, mutual funds and CDs. A truly self directed IRA/401(k) custodian, such as Equity Trust, allows those types of investments PLUS real estate, notes, private placements, tax lien certificates and much more.

What are the benefits of a self directed 401(k)?

In addition to the tremendous 401(k) benefits (tax-free profits, tax deductions, asset protection and estate planning), you can invest tax-free in investments that you know and understand, which through the power of compounding interest, can create true wealth for you and your family.

Why haven’t I heard of a self directed 401(k) before?

While the concept of investing in real estate and other assets in retirement plans has been around for more than 30 years, it hasn't received a great deal of attention. Why? Most custodians that offer 401(k)s (banks and brokerage firms) focus on mutual funds and CDs—because they have vested financial interests in having you select those investments from them.

Because the majority of custodians focus on stocks and CDs, there's a common misperception that these are your only investment options for retirement plans. But this is not the case (see Allowable Investments for IRAs).

My CPA/attorney/financial advisor hasn’t heard of a self directed 401(k). What should I do?

It's not uncommon for trusted advisors to never have heard of self directed 401(k)s, given the relatively unknown nature of these accounts.

At Equity Trust, we've worked with thousands of professional advisors across the country to educate them regarding IRA, 401(k), and self directed 401(k) rules so they can best customize their advice to meet your personal needs.

If your advisors haven’t heard of a self directed 401(k) before, they can contact an Equity Trust Retirement Specialist at 1-888-382-4727, or you can encourage them to join our self directed IRA Professionals Network.

Are self directed 401(k)s allowed under IRS rules?

Yes—as long as you follow relevant rules.

IRS Publications 560 and 590 clearly state the rules and regulations governing IRAs and qualified retirement plans such as 401(k)s. You can also read additional rules and codes on IRAs.

Are there special rules for self directed 401(k) investments?

Yes. To ensure compliance, you should be familiar with specific rules for 401(k)s, and, in particular, self directed 401(k)s.

There are certain types of transactions that you cannot perform through a 401(k). Most importantly, the IRS prohibits “self-dealing,” investments in which you or family members of lineal descent have prior ownership. For more information, please see IRA rules.

Are my self directed 401(k) investments guaranteed?

No investment (aside from FDIC-insured deposits) is guaranteed. However, most successful investors feel that the investment risk in assets they know and understand is much less than the risk associated with making only conventional 401(k) investments.

Is a self directed 401(k) for everyone?

Self directed 401(k)s are not for everyone. They're for those who want to create wealth using their knowledge of investing in assets other than stocks, bonds, and CDs.