Products and Account Types

What are the pros and cons of a Rocket Dollar Self-Directed Solo 401(k) vs the SEP IRA?

The Rocket Dollar Self-Directed Solo 401(k) offers high contribution limits, checkbook control, no custodian fees, and tax reductions. It does happen to be a bit more complicated to administer.

‍‍The Rocket Dollar Self-Directed Solo 401(k) offers benefits above and beyond other retirement vehicles, including:

Pros

High Contribution Limits: Annual contribution limit up to $55,000. Married couples may contribute up to $110,000, based on self-employed income generated in the previous calendar year.

Checkbook Control: Making any investment with your Self-Directed Solo 401(k) is as easy as writing a check, as you -- the account holder -- serve as trustee and custodian of the plan.

No Custodian Fees: The Self-Directed Solo 401(k) plan allows you to eliminate the expenses and delays associated with a custodian, enabling you to make alternative asset investments in real time.

‍Tax Deduction: By paying for your Self-Directed Solo 401(k) with business funds, you are eligible to claim a deduction for the cost of the plan, including annual maintenance fees.

No Roth Income Phaseout: Roth IRAs can become unavailable to high-income earners. Roth Solo 401(k) contributions are always available

Cons

More work to administer: If you are not familiar with a self-directed Solo 401(k), you might need to hire or consult a CPA to calculate your salary, contribution, and profit sharing.

Can only take self-employment income: If your self-employment income is not consistent, you might need to stop contributing 

Cannot have any employees: If you have any employees other than your spouse, you are barred from contributing to the solo 401(k). 

It cannot take outside Roth IRA Dollars: Solo 401(k)s can unfortanly only take Roth dollars from old 401(k)s and solo 401(k)s NOT Roth IRAs.

 

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