Mark Kohler explains how to self-direct a 401(k) as a small business owner. You can use an S corporation to fund the plan, roll in old IRAs, set up an LLC for checkbook control, and invest in real estate, hard-money loans, or cryptocurrency instead of stocks and bonds.
Hi, Mark Kohler here with another tax and legal tip. Let's talk about self directing a 401k. Can you, can you really self direct a 401k? The answer is yes. Now I want to break down some structures and strategies that you need to consider. But we're also going to talk about what this really means, self directing and why your stock broker probably isn't telling you can do it or maybe defining it in a different way. So we're going to break this down and, and help you on your way to better live your American dream. Alright, first I'm sure your stockbroker, well some of you have heard from your stockbroker that you can't do this. You cannot self direct your 401k. Well, the reality is some 401k platforms allow for it, some don't. Now I'm going to talk about the solo 401k for you small business owners and those with a few employees and what your options are. I'll structure that in a moment. But for many of you that have a day job and a big old 401k with 50 or more employees, company you work for has probably established a 401k that allows you to buy a few stocks and they call that self directing. But they're not going to let you pull that money and go invest in real estate or a racehorse or buy super bowl tickets. They're going to keep you in the Wall street mechanism. So that's why you'll hear from your employer or a stockbroker or someone say that you cannot self direct because their platform doesn't allow it. Now here's the important takeaway. It's not that you can't do it, it's that they can't do it or they don't want you to. So self directing a 401k is certainly possible and hopefully some of you that are business owners are going to be in the driver's seat on that. So let's look at some structures. Alright? So as many of you know, I'd like to divide my clients lives into two sides, operations and investing. So over here we have ops. Over here we have investing. Now typically to fund a 401k you have a couple options. First one is you're going to take your sole proprietorship llc. Hopefully not either one of these because it's going to cost you in taxes. Please watch one of my other videos. But you're ultimately going to be in an S corporation where we're going to set up a W2 and a K1. This is going to save you thousands of dollars in taxes, payroll strategy and also the 20% pass through big deal. Now you can set up a solo 401k or a group 401k that your other employees can participate in. And it can be a self harvest safe harbor plan. So don't stress out like it's going to cost you thousands of dollars to have other employees involved. Just we can talk about it. Give my office a call. And there's options here. But this 401k is typically going to be a solo 401k where you, your business partners, your spouse and your kids could participate in a 401k and you're going to make contributions and it's going to be a wonderful write off for your S corp. Now option 2 is you can take old IRAs or an old 401k from a job you don't work at anymore and roll it into here so you can roll this old IRA money in and kind of fast track your 401k where you're getting old IRA money and new contributions so you can go out and invest. That's getting the money there in the first place. Now that the money's there. And that's a big topic in and of itself, but you're getting money into your 401k. Now self directing allows you to invest in what you know best. I've had phone calls today with clients that are buying real estate, they're doing construction loads, hard money loans, clients that are buying cryptocurrency. And that's just today, literally just today's phone calls with clients from around the country. And I've got five tax attorneys in my office helping clients that are small business owners that can't normally afford a tax attorney at a big firm. We're there for you, the small business owner. So anyway, the self directing comes into play when you could create an llc, you could do loans, you could buy specific investments like cryptocurrency or something like that. I don't know. Whatever you know best, invest in what you know best. And that's what you do with a 401K. Now you're the custodian of this 401K. You'll control the checkbook of the 401K. Yes, you might set up LLC so that you could own specific pieces of real estate. But think of a 401k like a honeycomb. There's different pieces of a 401k. This might be your piece, this might be your kids piece, this could be your spouse's piece that be your business partners. So each little cell can be invested in its own particular way and you can have a solo 401k that invests in normal Wall street stuff and in self directed stuff you could do both. Guys, bottom line, you can control your own destiny. You can control this 401k bucket so much more affordably. In my new book, the Business Owner's Guide to Financial Freedom, I just want to say financial freedom, this is such an important topic because Wall street controls their financial advisors. They're captive. They can only sell what they tell them they can sell. But no, I want you to have control of your 401k and you can do it affordably and simply. Now some say, mark you giving people a 401k where they're their own custodian is like giving a kid a loaded gun because they don't know how to manage the 401k, they're going to screw it up and they're going to have taxes or penalties. And that's what the Wall street mechanism does to scare you from doing this. Guys, we will break down the rules, the provisions and the guidelines. I think our fee is 300 bucks a year to be your third party administrator to give you the guidebook, if you will, of what to do and you manage your own 401k. If you have a tax law firm that you trust, they should know this. If not, give our office a call too. But you, you should be able to invest your retirement plan in what you know best. So the answer is can you self direct your 401k? Heck yeah. It's just that your current employer may not allow for it or you've got the plan that needs to get modified or changed or adopt a 401k that gives you that control. Folks, the American dream is real. Investing your 401k is one of the fastest way to build wealth that's asset protected. And you're going to invest money in other ways too. It's not just about real estate. I want to have an open mind as I hope you have an open mind building your wealth. So don't give up and keep living your American dream. Thanks so much for watching and if you found that helpful, please look in the description below. I've got links to my tax and legal library, my QuickBooks training videos, how to start a small business 50, 60, 70 videos, some as long as 30 minutes, explaining more information on tax and legal strategies that will change your life. Also, if you'd like to subscribe to my newsletter or check out my social media links, please click here. Their weekly form free tips and strategies and articles that you'll find extremely helpful and I would appreciate it if you'd subscribe to my channel. I've got so many videos here I produce every week on my YouTube channel and I'd love to give you a ping every time I shoot a new video. Thanks so much and keep living the American Dream.
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