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Home > Blog > Self-Directed IRA vs. Solo 401(k)

Self-Directed IRA vs. Solo 401(k)

What are the Differences Between a Self-Directed IRA and Solo 401(k)?

What Are the Qualifications?

Self Directed IRA Solo 401(k)
Who can open this account? Any working or retired person. Must be self-employed without any full-time employees.
Maximum annual contributions (2022) Age<50 = $6,000
Age > 50 = $7,000
Sep IRA = $61,000
Age<50 = $61,000
Age>50 = $67,500
Need for custodian Yes No
Entity that holds retirement money LLC/Trust Trust
Can invest in Life Insurance No Yes
Can invest in Art/Collectibles No No
Start of RMD By 04/15 on year after 72 By 04/15 on year after 72
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 401k 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 & contributions made; 1099R if any distributions;
990T if UBIT or UDFI
5500-EZ only if plan assets exceed $250,000.
990T 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, they can use the same account
Consequences of Prohibited Transactions Distribution of entire IRA Can undo PT
Roth component Income restricted Not income restricted
Contributions & Distributions Into IRA Into Solo 401k trust account
Placing Investments (in & out) LLC/Trust checking account Trust checking account
Can Invest in an S. Corp No Yes

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