Speak with a Broad specialist:
(800) 395-5200Schedule a CallOpen an Account
Speak with a Broad specialist:
(800) 395-5200Schedule a CallOpen an Account
Home > Blog > Solo 401(k) vs. Self-Directed IRA: What's the Difference, and Which Is Better?

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 IRASolo 401(k)
Who Can Open OneAny working or retired person

Self-employed people without any full-time employees

Maximum Annual Contributions (2024)

Age<50 = $7,000
Age>50 = $8,000
SEP IRA = $69,000

Age<50 = $69,000
Age>50 = $76,500
Need for CustodianYesNo
Entity That Holds Retirement MoneyLLC or TrustTrust
Can Invest in Life Insurance?NoYes
Can Invest in Art/Collectibles?NoNo
Start of RMDBy April 1 in year after you turn age 73By 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 ContributionsNoYes
Availability of Funds Transferred

Clears via custodian, then transfers to LLC/trust

Directly into Solo 401(k) account
Checkbook ControlYesYes
Personal Loan From the AccountNo50% of account value up to $50,000
UBIT for Active InvestmentYesYes
UDFI for Margin TradingYesYes
UDFI for Real Estate LeverageYesNo
Annual Report Filings5498 for current account value and contributions made; 1099-R if any distributions; 990-T if UBIT or UDFI5500-EZ only if plan assets exceed $250,000;
990-T if UBIT (or non-real-estate UDFI)
Annual Amendments NeededNoYes
Annual Maintenance FeePaid to custodianPaid to Broad Financial
Roth Component AbilityRequires separate accountCan have Roth & Traditional in same account
Can Spouse/Partner Make Contributions/Use Same Account?No, one person per IRAYes
Consequences of Prohibited TransactionsDistribution of entire IRACan undo prohibited transactions
Roth ComponentIncome-restrictedNot income-restricted
Contributions and DistributionsInto IRAInto Solo 401(k) trust account
Placing Investments (In and Out)LLC/trust checking accountTrust checking account
Can Invest in an S CorporationNoYes

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.


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