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Checkbook IRA vs. Solo 401k

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What is a Checkbook IRA?

Self-Directed IRAs have been around since the 1980s, and real estate has been the most popular alternative investment. IRA accounts are required by law to have a holding institution called a “custodian.”

The Custodian Problem

Over the years, custodians have been sued so many times that it has created bureaucratic red tape that slows transactions down. In the 2000s in particular, the transaction processing delays killed countless investment deals that would have been profitable.

The Checkbook Solution

Trailblazing attorney Debra Buchanan developed a solution to pair a custodian self-directed IRA account with a special-purpose LLC. The LLC is designed specially to be compliant with IRA laws and regulations.

This video illustration shows the flow of the how the Checkbook IRA structure is established:


In the 1980’s and 90’s, a Self-Directed IRA custodian account was the best solution because it was the only way to invest IRA funds into real estate and other alternative assets.

In the 2000’s, the Checkbook IRA was the best solution. At first, the legitimacy of the structure was under question, but attorney Debra Buchanan’s research was thorough. In collaboration with government agencies in Washington, D.C., rulings were discovered dating back as far as 1989 that declared the Checkbook IRA structure to be legitimate.

Then in 2006, we got…

The Upgraded Checkbook: Solo 401k

The passing of the new Pension Protection Act launched Solo 401k into the spotlight. This new law made it possible to rollover funds into a 401k, just like a Rollover IRA, starting in 2006.

This exciting new development brought Solo 401k to the forefront of the Self-Directed IRA industry. Within weeks of the passage of the PPA law, lead by founder Jeff Nabers, we launched the leading Self-Directed Solo 401k solution in 2006, paving the way for less confusion and more freedom.

Now, in the 2010s, the Solo 401k is the leading self-directed investing solution for buying and managing alternative investments such as real estate.

Our Solo 401k solution is the answer to the question:

What if you could combine all of the strongest points of IRA and 401(k) accounts, and fix the weaknesses?

IRA Strengths

  • IRA accounts are tied to the individual, so that keeps things simple. IRAs can receive rollovers from any other “defined contribution” type of retirement account such as another IRA, 401(k), 403(b), 457, SIMPLE IRA, SEP IRA, Keogh, etc.
  • IRAs can be self-directed.

IRA Weaknesses

  • IRA accounts are subject to heavy taxation when invested into debt-leveraged real estate investments.
  • IRAs require a holding institution called a custodian. Custodians are a necessary middleman for an IRA, and they require additional processing time for transactions. Also, custodian companies can (and do) deny transactions they are unfamiliar with for fear of being sued later.
  • The only way to get around the custodian problems with an IRA is to an LLC as another layer to its structure, introducing additional required annual filings, costs, and complexities.
  • IRAs are limited to fairly small annual contributions and can take a long time to accumulate significant value. The current annual limit is $5,500 or $6,500 if you are age 50 or over.
  • If you make over $116,000 per year you are not allowed to contribute any money to a Roth IRA
  • Traditional IRAs and Roth IRAs have to be kept on separate accounts and platforms, making it harder to accumulate enough money to create a diversified real estate portfolio.

401(k) Strengths

  • 401(k) plans are exempt from taxation on debt-leveraged real estate investments.
  • 401(k) plans do not require a holding institution or any middleman, and thus can avoid additional processing times and the potential for bureaucratic denial of investment for perfectly legal investments.
  • 401(k) plans allow for the accountholder to borrow up to $50,000 tax-free for any reason.
  • 401(k) plans can allow two or more investors to pool funds for greater investment access and diversification
  • 401(k) plans can allow much larger annual contributions and can accumulate significant value much faster than IRAs. The current annual limit is $18,500 or $24,500 if you are age 50 or over.

401(k) Weaknesses

  • Traditionally, 401(k) plans are setup for companies with multiple employees and thus require:tens (or hundreds) of thousands or dollars in annual maintenance fees extensive annual compliance reporting and testing
  • ERISA bonding to cover any potential fraud that is possible with so many different people’s money being handled and controlled by third parties restrictive documents that restrict and hinder the individual accountholder’s ability to take full advantage of 401(k) investment powers
  • Most 401(k) plans are designed by an advisor who receives fees in exchange for directing all investment options to Wall Street public securities products, and thus do not allow alternative investments.

The Solo 401k: A Dream Come True

Our Solo 401k platform combines the strengths of both types of accounts and solves the weaknesses:

  • You rollover funds into your Solo 401k from virtually any other type of retirement account.
  • Your Investments can be self-directed.
  • There is no need to hire, pay, and wait for a custodian to hold your assets. You get
  • “Checkbook Access” built-in, without the need to register any LLCs.
  • Your Solo 401k is exempt from taxation on debt-leveraged real estate investments.
  • You will never have a third party deny you from investing in a legally compliant investment (which happens with custodians).
  • Your Solo 401k can include additional Unlimited® Subaccounts for your spouse as well—Tax deferred and Roth.
  • You can borrow from your Solo 401k funds up to $50,000 tax-free for any reason.
  • Your spouse, if named as a participant, can also have unlimited rollovers received that can be self-directed into alternative investments.
  • Your annual contribution limits are the most favorable of any retirement account in existence. The current annual limit is $55,000 or $61,000 if you are age 50 or over. Incredibly, your spouse can contribute up to an additional $61,000 as well. This can make an enormous different leading to much faster wealth accumulation.
  • A Roth 401(k) subaccount is available, even if you make too much money to be allowed to contribute to a Roth IRA.
  • Within certain limitations, you can designate how much of your money you want to be designated as “Roth” and how much you want to be tax-deferred the traditional way.

The Solo 401k Platform Includes a Checkbook IRA

All of the capabilities of the Checkbook IRA are now included in the Solo 401k Unlimited® platform automatically, without any need to register additional entities with government agencies or holding institutions.

While LLCs (Limited Liability Companies) can be used for asset protection strategies, they are not required in order to get “Checkbook Control” or check-writing privileges on our Solo 401k platform.

Not only does our Solo 401k Unlimited® Investing platform come with your own Checkbook IRA account included, but it also comes with Unlimited® subaccounts as well:

These enable you to invest in real estate, gold and other precious metals, traditional brokerage securities, and other alternative investments… all from a single very powerful investment platform.


4 Responses

  1. Would like to inquire about a rollover from an annuity to one of your options for real estate rehab project. Thank you for the information.

    1. Hi Ethan, great question! Your wife will need to receive compensation from your business in order to contribute to the company Solo 401k plan. If you can compensate her as an employee (or owner-employee), then she can make contributions based on her compensation/earnings from the business.

  2. Looking for a special purpose LLC for self directed 401(k) management agreement Something that includes all the language needed for IRS/Erisa thre does not seem to be one out there

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