Knowing which Solo 401k providers are best for you can be a confusing proposition. Since not all providers offer the same services, it is recommended that you first educate yourself on the varying degrees of Solo 401k providers before making any final decisions.
There are essentially three different types of Solo 401k providers to choose from; each offering a unique set of guidelines for retirement investing and each one geared toward a specific type of retirement investor.
Whether you want full control of your investments or you would prefer that somebody else handle it for you, there is a Solo 401k option for you. In order to better understand which one fits you best, we must first know the difference between the three.
First there is the Solo 401(k) offered by self-directed custodians and trust companies. This type of investment strategy allows the investor to put their retirement savings into an alternative investment package, such as real estate, private business, tax liens or tax deeds and more.
However, when choosing this type of Solo 401(k), you put yourself at the mercy of the company holding the investment. They typically charge a wide array of fees, ranging from account set-up, to quarterly holding fees, fees per asset and so on. In addition, all investment paperwork must be submitted to the custodian and be approved by them before any investment purchase can be finalized.
A second type of Solo 401(k) Providers is the one offered by banks and and brokerage firms. This is a more conventional type of investing, which often focuses primarily traditional investments such as stocks, bonds and mutual funds. This type of provider will have substantial limitations to the plan documents allowing you only invest in products they offer. Most likely the loan options and Roth sub-account will not be available.
Last and certainly not least, is the Self-Directed Solo 401(k). The self-directed Solo 401(k) is an ideal fit for those looking to be in control of their retirement investing. Unlike the previous two Solo 401(k) providers, a self-directed Solo 401(k), offers you the chance to act on your own behalf as the trustee of the plan. This allows you, as the investor, full control over all the private documentation pertaining to your investments and at the same time bypass any transaction and holding fees that would apply.