BACKGROUND: I am currently employed by DTE energy.
I am also starting a small business involved in Real estate investing.
I would like to utilize these funds in order to purchase properties and return the profits back to the 401K.
I know it is an available investment option for a Self-Directed IRA LLC or Self-Directed 401K.
QUESTION: My questions is…. Can I roll over an existing 401k plan to a self-directed 401k?
I have heard that if one is currently employed and contributing that this is not an option.
ANSWER: Whether you can transfer your existing 401k with your current employer to a self-directed 401k is twofold.
First, while not dependent on your current employer, you must be self-employed, whether full time or part time in order to open a solo 401k and have no full-time employees (generally defined as those working 1,000 or more per year).
Second, some full-time employers will allow you to transfer your employee (salary deferral) contributions even while you are still self employed. I suggest obtaining a copy of your current employer’s 401k plan document to confirm such as the applicable language is often hidden deep in the plan document. However, you will most likely be restricted from transferring your employer profit sharing contributions unless you are age 59 ½ or older and fully vested in the 401k plan.
QUESTION: Second, I have a 403B when I worked for the Univ of Michigan. Is it available to be put into the same account?
ANSWER: Because the 403(b) is from a former employer, yes the transfer/rollover portable rules as updated by the 2001 EGTRRA rules allow for the transfer of a former employer 403(b) to a 401k including a self-directed 401k, provided you qualify to open a solo 401k as detailed above.
Scott L in Michigan