Take Back Control of Your Retirement Dollars via a Self-Directed Solo 401(k)

Well, Happy National 401(k) Day! While not as warm & fuzzy as National Teddy Bear Day (also celebrated on 9/9) or delicious as Bagel & Lox Day, today is an essential holiday for adults to put away their summer swimmies and focus on their retirement.

This holiday is often overlooked, as the stock market has exhibited positive returns in 21 of the past 26 years, since this holiday began in 1996. The traditional 60/40 portfolio allocation (eg. 60% stocks, 40% bonds, for a 40yr old; or 40% stock/60% bonds for a 60yr old) also served The Greatest Generation well in their retirement years.

This is no longer the case for Boomers, Gen X, and younger generations. The average 10yr Treasury yield has not topped 3% since 2010, while the VIX Index (measure of volatility) has been above 20 for ten of the past twelve months. Overall, most folks do not look at their retirement portfolio unless the market is down or experiencing high volatility. And when folks finally look at their portfolio, many do not heed Buffet's advice, and may make an emotional decision to "sell low".

On a brighter note, the curtain has been pulled back on the Wizard of Oz, with millions of people across the US realizing that the "set it and forget it" strategy for their current 401(k) and Rollover IRA does not sync with their goals - both financial and personal. In regards to the latter, there is a renewed focus to invest locally, coupled with personal desire to invest with female entrepreneurs, and offer loans to business owners in underserved communities.

To achieve these goals, individuals must first be aware of the "new" 401(k) product, the Self Directed Solo 401(k), aka the Solo 401(k). The Solo 401(k) was born out of the Economic Growth and Tax Relief Reconciliation Act of 2001, ie. EGTRRA.

Rocket Dollar, an Austin, TX based company, describes The Solo 401(k) as the premier retirement savings plan account available for individuals with qualified self-employment income.? The Solo 401(k) also empowers self-employed individuals, including entrepreneurs, consultants, and realtors, the right to contribute up to $61,000 in 2022.

The most common investment from the Solo 401(k) is real estate. My favorite story is of a pilot, in his late-50s, when learning of the Solo 401(k), rolled over funds from his IRA into his "Solo K" to purchase four rental properties in the Cayman Islands.

In the spirit of retirement, other individuals elect to simply serve as passive investors into single properties and portfolios of residential and commercial real estate. BV Capital, a veteran owned, Dallas-based subsidiary of Bridgeview Real Estate, offers Solo 401(k) account holders the opportunity to invest in a variety of assets, including a portfolio of Triple-Net (NNN) Industrial properties that provides a monthly distribution.

As a longtime passive investor - aka LP or limited partner - in over 50 deals, with my Solo 401(k) and checkbook control SDIRA, I have retained the recognizable tax benefits of a Traditional (pre-tax) 401(k) and ROTH (post-tax) IRA. In addition, unlike a bond or "high yield" stock, where price varies on a daily basis, the value of my passive investments tends to stay flat, and remain the same as my initial cost basis, until the property is sold or similar equity event.

Finally, please note that an individual can rollover as much, or as little, as he or she desires. For example, if your Rollover IRA is valued at $1,000,000, you can initially rollover $100,000 into your Solo 401(k) - eg. to fund a passive real estate investment. Likewise, you may max out contributions (up to $67,500 for those aged 50 and over) or contribute zero.

Let's make 9/9/22 the best National 401(k), and Teddy Bear, day yet! Snuggle up, learn more, and take action to open your Solo 401(k) today!

Dan Kryzanowski took back control over his retirement dollars in the early 2010s, achieving double-digit returns in his Self Directed Solo 401(k) & ROTH SDIRA for the past decade. Reach out to Dan on LinkedIn to learn more.