Rocket Dollar Knowledge Base

What do I need to know when I open my bank accounts?

For Self-Directed Solo 401(k) trusts and Self-Directed IRA with LLC bank accounts, there are a few things to keep in mind.

 

Self-Directed IRA with LLC

With a Self-Directed IRA with an LLC, you will need to open a business bank account for the LLC. If you're planning to use Roth dollars in the Self-Directed IRA, you will want to open a second bank account for the Roth dollars.

 

You can get a debit card and a checkbook. You can then write a check, use a debit card, send a wire, or use an electronic funds transfer (EFT) to make an investment out of the business bank accounts. These accounts should not have overdraft protection and you should not apply for a credit card in the name of the LLC. Overdraft protection and a credit card could be considered an extension of credit-based prohibited transactions. A prohibited transaction in an IRA could risk the entire IRA being distributed.

Can I open both a savings and checking account with the LLC?

Yes, you can open both associated with the LLC.

Self-Directed Solo 401(k)

With the Self-Directed Solo 401(k), you will need to open a trust account or several trust accounts. Typically, an investor will want at least two trust accounts: one for pre-tax dollars and one for Roth dollars. If you plan to make voluntary after-tax contributions you would want a third trust account. Additionally, if you plan to do in-plan conversions you may want a separate account for the conversions each year. The bank accounts are how the investor gets "checkbook control" over the 401(k).

You can get a debit card and a checkbook. You can then write a check, use a debit card, send a wire, or use an electronic funds transfer (EFT) to make an investment out of any of the accounts. These accounts should not have overdraft protection and you should not apply for a credit card in the name of the trust. Overdraft protection and a credit card could be considered an extension of credit-based prohibited transactions. It's important to note any cash flow or investment gains from an account, such as the pre-tax account, must go back to the pre-tax account to maintain the tax benefit.