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Solo 401k FAQ – How can I invest in real estate from my Solo 401k at Vanguard, Schwab, or Fidelity?
QUESTION:
Can you help explain how alternative investments, including real estate holdings are possible in a solo 401(k) with an account held at Vanguard, Fidelity, or Schwab?
RESPONSE:
Good question as one of the most popular reasons clients open accounts with us is the ability to invest in real estate or other alternative investments.
First, it is important to understand that a solo 401(k) is a legal entity. It is a retirement trust right in that the assets are held in trust for the benefit of the employee.
Like any legal entity, it is the documents that create the plan.
We are a 401(k) plan provider and our documents allow for investing in real estate.
Under the Solo 401k rules, one may invest solo 401k funds in real estate provided that one’s Solo 401k plan documents allow for investing in alternative investments like real estate.
While many brokerages offer a basic Solo 401k plan, their plan documents don’t allow for investing in alternative investments but instead limit the investments to mutual funds, stocks, etc., and other investments that the brokerage offers.
At the same time, several of the brokerages (such as Fidelity, Schwab, TD Ameritrade, etc.) will open up accounts for third-party plans like ours that do allow for investing in real estate or other alternative investments.
In this case, the brokerage is merely providing the account which is governed by a third-party Solo 401k plan document which does allow for investing in real estate or other alternative investments.
