The IRS allows many types of investments in a self-directed solo 401k. While self-directed solo 401k plans are most often invested in equities (stock and mutual funds) as well as alternative investments (e.g., real estate, tax liens, notes and precious metals), as solo 401k plans may also be invested in certificates of deposit (CDs). When interest rates rise coupled with a volatile stock market, 401k plans including self-directed solo 401k plan investors begin to look to invest in certificates of deposit.
Certificates of Deposit
- They are easy to understand, guarantee principal and pay a fixed interest;
- are insured by the Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Administration (NCUA);
- are eligible for coverage by the Securities Investor Protection Corporation (SIPC )protection because they are considered securities;
- can be short-term (e.g., 3 months, 9 months, 12 months, etc.); and
- may be held in IRAs and self-directed solo 401k plans.
Certificates of deposit are considered traditional investments because they have a readily available fair market value which also makes them more attractive over alternative investments during volatile economic times.
Video Slides: https://www.mysolo401k.net/wp-content/uploads/2023/03/Can-I-invest-my-Self-Directed-Solo-401k-in-Certificates-of-Deposit-CDs.pdf
3 Steps -Investing Your Self-Directed Solo 401k in Certificates of Deposit (CDs)
With a self-directed solo 401k, you can choose to have the plan’s funds held at a bank, credit union or at a brokerage firm such as Fidelity Investments or Charles Schwab, for example.
For clients’ of My Solo 401k Financial, we will assist them in opening the bank accounts or self-directed brokerage accounts for their solo 401k plan.
First Open Bank Account or Brokerage Account:
It is pretty seamless to invest in CDs once the bank account or brokerage account for the solo 401k has beene stablished if you have not already done so.
Second- Fund the Solo 401k Plan:
Third-Invest in the Certificate of Deposit:
Fidelity Investments
As indicated above a self-directed solo 401k where you used Fidelity Investments for the brokerage account may also be invested in CDs. To learn more, visit here.
