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Solo 401(k) vs. Self-Directed IRA: What's the Difference, and Which Is Better?

Both a Solo 401(k) and a Self-Directed IRA can be great choices to help you gain control of your retirement planning, but which investment option is right for you? Compare the features and benefits of a Solo 401(k) vs. a Self-Directed IRA to determine which is the best fit for your unique circumstances.

	Self Directed IRA	Solo 401(k)
Who Can Open One	Any working or retired person	Self-employed people without any full-time employees
Maximum Annual Contributions (2025)	Age<50 = $7,000 Age>50 = $8,000 SEP IRA = $69,000	Age<50 = $70,000 Age>50 = $77,500
Need for Custodian	Yes	No
Entity That Holds Retirement Money	LLC or Trust	Trust
Can Invest in Life Insurance?	No	Yes
Can Invest in Art/Collectibles?	No	No
Start of RMD	By April 1 in year after you turn age 73	By April 1 in year after you turn age 73
Minimum Withdrawal Age	<59.5 = 10% penalty taxable distribution >59.5 = tax distribution	<59.5 = 10% penalty taxable distribution >59.5 = tax distribution
Required Minimum Distributions (RMDs)	Yes (Roth: No)	Yes (Roth: Yes)
Required Contributions	No	Yes
Availability of Funds Transferred	Clears via custodian, then transfers to LLC/trust	Directly into Solo 401(k) account
Checkbook Control	Yes	Yes
Personal Loan From the Account	No	50% of account value up to $50,000
UBIT for Active Investment	Yes	Yes
UDFI for Margin Trading	Yes	Yes
UDFI for Real Estate Leverage	Yes	No
Annual Report Filings	5498 for current account value and contributions made; 1099-R if any distributions; 990-T if UBIT or UDFI	5500-EZ only if plan assets exceed $250,000; 990-T if UBIT (or non-real-estate UDFI)
Annual Amendments Needed	No	Yes
Annual Maintenance Fee	Paid to custodian	Paid to Broad Financial
Roth Component Ability	Requires separate account	Can have Roth & Traditional in same account
Can Spouse/Partner Make Contributions/Use Same Account?	No, one person per IRA	Yes
Consequences of Prohibited Transactions	Distribution of entire IRA	Can undo prohibited transactions
Roth Component	Income-restricted	Not income-restricted
Contributions and Distributions	Into IRA	Into Solo 401(k) trust account
Placing Investments (In and Out)	LLC/trust checking account	Trust checking account
Can Invest in an S Corporation	No	Yes

Interested in Learning More? Schedule a call with one of our Self-Directed Specialists today to get answers to your questions and find the investment vehicle that's right for you.