Self Directed 401 k Rollover from Traditional Plan

Individuals are becoming aware that the real diversification of a retirement plan can only be achieved in the presence of either a self directed 401 k or a self directed IRA. Under a self-directed retirement plan, you have the authority to choose investments that can propel your retirement account gains. Usually, these investment options provide plan holders with alternative investments that are different from what the risky brokerage retirement plans provide. Investment options include real estate, precious metals, and start up business to name a few.

self directed 401 k

self directed 401 k

Previous employees who plan to become self-employed or current employees who run a small business on the side are welcome to set up a Solo 401k plan or rollover their existing traditional retirement plan to a self directed 401k plan easily. There are two ways to rollover a 401k or an IRA—direct rollover and traditional rollover.

Do not risk your retirement savings when planning a rollover to a self directed 401 k. As much as possible, transferring your funds immediately to your new account is the best option.

Direct Rollover – This is the easier way to rollover your account. It involves fewer documentations and the transition on the new account is faster. In a direct rollover, the funds from your previous account are directly deposited to the bank account of the newly set up Solo 401k.

Traditional Rollover – This is also called the 60-day rollover because of its 60-day rule in transitioning your funds to your new retirement plan. In a traditional rollover, the funds from the previous plan are transferred to plan holder’s personal bank account. The money transferred must be deposited to the new self directed 401 k within 60 days, failure to do so will result in heavy taxes and penalty.

To avoid risking your retirement money and avoid paying taxes and penalties, going for direct rollover is recommended. If you plan to use your funds on other things during a traditional rollover, you have to make sure that the funds will be returned before the 60-day period.