Self manage 401k | Self-Directed 401k | 401k Trustee

QUESTION: I’m interested in opening a 401k that I can self manage and also invest in real estate that I can self manage, can this be accomplished using a self-directed 401k?

Regards,  Susan L. in TX

ANSWER:  Yes a self-directed 401k is a type of 401k but for the self-employed that can be self managed by the 401k owner. Note that the IRS has specifically published information on its 401k section of the IRS website that specifically details the 401k business owner can self manage his or her 401k as the listed trustee.

“IRS Language”
“Trusts and trustees. 401(k) plans are funded through a trust established to hold and invest the plan’s assets. At least one trustee is appointed to have responsibility for the activities of the trust and its assets. This is a serious responsibility with considerable potential for liability. Trustees might include the business owner, an employee, or a financial or trust institution.”—Plan-Sponsors—Starting-Up-Your-Plan

Nonetheless, when one self manages his or her 401k caution should be exercised. For example, a business owner acting as the trustee of the 401k should not receive compensation for managing the assets of the 401k including real estate. Moreover, the 401k trustee may not perform repairs on the property nor personally use the 401k real estate investment as it would be deemed a 401k prohibited transaction. Note however that self managing the real estate is acceptable (e.g., looking for tenants, hiring contractors for repairs, holding the documents in connection with the real estate purchase) as outlined above: “At least one trustee is appointed to have responsibility for the activities of the trust and its assets”.

About Mark Nolan

Each day I speak with energetic entrepreneurs looking to take the plunge into a new venture and small business owners eager to take control of their retirement savings. I am passionate about helping others find their financial independence. Having worked for over 20 years with some of the top retirement account custodian and insurance companies I have a deep and extensive knowledge of the complexities of self-directed 401ks and IRAs as well as retirement plan regulations. Learn more about Mark Nolan and My Solo 401k Financial >>


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