How to Maintain your Solo 401k

Hi, Matt Sorenson here with my law partner, Mark Kohler. Ready to talk to you about how to maintain your solo 401k.

Now, this is an important topic and I want to commend you for watching a video of. Oh, I got to maintain this thing. I know you wanted to avoid this video. No, listen to this, guys. There's a lot of critics out there that don't like what we're doing. Setting up solo 401ks for self directing because they argue we're giving really a loaded handgun to a child. That's the equivalent. Because this financial instrument, a 401k, it's dangerous. You can screw it up. And if you've got to have some maintenance to really protect yourself from problems with the irs. Yeah.

And to us, it's a really valuable tool. You just got to know how to take care of it. You know, maybe polish the gun or, you know, I'm going to run this analogy, but you know what we're saying. Okay, take care of it. All right. And let's hit a couple things we want to make sure you do.

First.

You got to have an accounting of it. You got to have some records of what the heck's going on in it. Did I put money in it? Did I take money out of it? What investments do I have? Okay. You don't have a folder with a bunch of crap you put in it. All right? You need an accounting of that. That's what directed Ira does for you with our solo 401ks. You have a account login. You get quarterly statements. We update your account from the information you provide us.

Now, that information you're going to provide really comes from a checkbook. This is what we want everybody to do when they get their 401k package is go down to the bank and set up a checkbook, which if you're on a DIY plan setting up your 401k, you can go down to the bank and run into some roadblocks because you're not sure what to say.

You might want to take a tent and a sleeping bag because you're going to be there for a while.

Yeah. With our more full support 401k set up, we're going to help walk you through some techniques to help get through the banking process. But you got to have a checkbook. Yeah. And that checkbook is going to be the foundation of your record keeping. To document what you put in, what you take out. And give that to our AMP or directed IRA maintenance plan. It's like 300 bucks a year, very affordable. And they're going to help give you the reports and online access at any given time. You know it's there.

Yeah.

Now, number two, make sure you don't

screw it up by committing a prohibited transaction. Do you know the prohibited transaction rules? Are you transacting with yourself or certain family members who are prohibited to the account? We want to make sure you understand those rules because that is where you could really cause a problem for your retirement account. Penalties, possible excise taxes.

Yeah, you don't want that. Yeah. And when you set up a 401k, you should be getting from your provider, whoever helped you. What we give our clients is a binder, lots of reading material, some extra videos and that consultation when they need it. And if you didn't set up your 401k with us, it's okay. Call our tax lawyers. Just all a card us for 20 minutes here, half hour. There's maybe once a year, have a little planning session to talk about what you're doing in your 401k so you don't step on a landmine. Yeah.

Now, one other key thing. If you got over 250,000 of assets in the Solo 401K tax return, you have to file what's called a5500EZ for the Solo 401K. If you're under that, there's no tax reporting for the Solo 401k itself. You may be reporting your contributions or have some tax reporting stuff you got to take care of if you're rolling over or transferring funds into it. But the plan itself does not have to file its own tax return until you're at 250,000 of assets.

Okay, I'm going to throw out one last, you know, problem, and that is if you have multiple accounts within the 401k, say your spouse is contributing, say you've got kids involved, say you have Roth pieces and traditional pieces. Think of the 401k like a honeycomb. And you've got all these little accounts within the 401k you got to track as well. So you can see where a good little accounting support system would be important. We've got that service check down below. But in other videos on this where we talk about the Roth 401k piece. So lots of. Lots of things. Lots of opportunity, but it comes with some responsibility.

Yeah. And there's a lot of detail in the plan binder of our 401ks on how to track that, how to account for it, what the rules are. Of course, My chapter in my book, the Self Directed IRA Handbook has a whole chapter.

I knew he'd plug his book. I knew he'd plug his book in this video.

So there's just. If there was a better book, I would tell you.

Okay, that's true. So get over to self directed IRA handbook.com the IRA handbook.com that's where you can get a copy of Matt's book, second edition, mind you. So it's pretty good.

I'm being book shamed right now.

I have a chapter on this in my book as well, but apparently it's not as good as his book. But check it out anyway. Lots of fun here. We hope you're enjoying your 401k ride. Just buckle up all the rules, keep your hands and arms in at all times and you're going to love the ride.

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