Longboat Retirement Solutions LLC

Your 401k Stinks April 5, 2016


Part Three: Self Directed Retirement Questions May 19, 2015

This is the third installment in the Self Directed Retirement Questions, Answered.

These are questions I’ve been asked, my answers to those questions, and some commentary.

Question:  What is the difference between a Self Directed IRA and a Solo 401k?

Answer:  A Self Directed IRA requires a Custodian.  Custodians are generally banks and investment houses.  These Custodians charge fees to baby sit your money and tell you where you can and cannot invest your savings.  An SDIRA is far better than a standard IRA, but it can still have high management fees, hoops to jump through, and limitations in what you can invest in.

A Solo 401k, which is designed for the self employed, enables you to invest in anything that the IRS allows.  You become the Custodian; therefore you don’t have any filters on your investments (within the framework of the IRS’s allowed investments).  You basically don’t have to ask permission to use your own savings as you see fit.  Since it is a 401k, you can also borrow up to 50% of the value, up to $50,000.  And again, you don’t have to ask permission or fill out piles of paperwork to take out a loan.  You draw up the terms, put the terms in your safe, write a check from your 401k to you, and then just make the monthly payments to your 401k.  Because you are making payments to your 401k, the interest is essentially free – you are paying yourself!  A Solo 401k also enables you to contribute as the employee and the employer; in other words you can contribute over $50,000 a year to your retirement account – or over $100,000 if your spouse is a partner in the business.  This is a BIG deal.

My thoughts on the two different approaches boils down to this:

If you can, go with the Solo 401k.


Solo 401k and Self Directed IRA LLC Pricing June 10, 2012

June 9, 2012

BY: Lars Forsberg,

Why are the prices all over the map for the creation of Solo 401k’s and Self Directed IRA LLC’s?

Like any product or service, the perceived quality of the product and/or the level of service determines the price.

Often promoters of self directed retirement products have ulterior motives.  These promoters will sell their plan establishment services cheap, with the intention of pushing other investment products on clients down the road.  These guys are kind of like drug dealers who give people cheap introduction pricing on drugs, knowing that once addicted, the people will return to purchase more.  Beware the self directed plan pusher who tries to convince you to pursue risky investments or behavior that may invite the scrutiny of the IRS.

If it appears that a promoter of self directed retirement products pushes only real estate investing on their website, or encourages ROBS (Roll Overs as Business  Startups) strategies, consider their motives.  This is not to say that any particular alternative investments are always superior to others.  To the contrary, beware the “expert” who knows how you can skirt the rules and “make a fortune” doing this or that.

Other promoters provide little or no after-sale service.  These companies will sell you their retirement products, then set you loose.  While self directed investing is fairly straightforward once you understand what is acceptable and what is not, initially you will have questions, and you will need answers to avoid pitfalls.

You should not limit your choices to the companies that have the most spectacular web site or marketing.  You should not limit your choices to the companies with the most familiar names.  Whatever you do, don’t look for bargain basement pricing.

Choose a self directed retirement package that fits your personal needs.  Be sure that the plan you choose gives you the most power and flexibility.  Choose a company that you are comfortable with.  Choose a company that will support you after the sale, rather than try to sell you on other products.  When you are dealing with a decision as important as this one, take your time, do your research.


What is a Self Directed IRA LLC? May 26, 2012

Filed under: Real Estate Investing,Uncategorized — larsfforsberg @ 5:45 pm
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Many Wall Street brokerage firms and custodians use the term Self Directed IRA to describe  their programs that limit your investment choices to products that they sell. When Longboat Retirement Solutions uses the same term, it means you can invest into any asset allowed by the Internal Revenue Code. The only investments not allowed are collectibles and life insurance.

This structure allows an account holder to completely control investments with increased flexibility and reduced operational costs compared with operating out of a custodial account.

The LLC Formation

Longboat assists clients with creating Articles of Organization for an LLC with the state in which the LLC is to be operated. It is considered a business entity structure which is a hybrid combining aspects of both a partnership and a corporation.

After the IRA is moved into the LLC, it authorizes the Manager (generally the IRA account holder) to set up a checking account that will be utilized for making investments. The Manager of the LLC can enter into contracts and agreements on behalf of the LLC.


You can rollover funds from Traditional IRAs, Roth IRAs, 401k Plans, 403b Plans, Money Purchase plans, Profit Sharing plans, Keogh plans, Government Eligible Deferred Compensation Plans, ESA Plans, HSA Plans, Qualified Annuities and more to initially fund your IRA LLC. You do this by setting up a account for the IRA LLC and directly transferring the funds from the Custodian to the newly created IRA LLC bank account.

Investing in Real Estate

The Longboat client can now make an offer, negotiate a deal, and acquire real estate. Once real estate is acquired, the client can handle administrative duties or appoint a property manager.

Income-producing properties can provide your plan with monthly income as well as long-term gains through appreciation. There are no limitations on the types of properties that can be held within your Real Estate IRA.

Real Estate has always been permitted inside IRA retirement accounts under the Employee Retirement Income Security Act of 1974 (ERISA). As your IRA LLC funds grow, you can continue to invest.

Contributions are made to the Self Directed IRA Custodian and invested into the IRA LLC. Distributions are initiated via sales of LLC shares to the Custodian.

Income to an IRA associated with the financed portion of a property purchased using a non-recourse loan is subject to the Unrelated Debt Financed Income (UDFI) tax. UDFI is a type of unrelated business taxable income.


What is a Solo 401k?

A Solo 401k is a retirement savings plan designed for self employed individuals.

Solo 401k Advantages

A Solo 401k plan possesses most of the characteristics of the Self Directed IRA LLC, including having the ability to invest in anything the law allows, but without the need to establish an LLC. It’s the most tax-advantaged, self employed plan available with very high annual contribution limits. You can set up this plan even if you’re employed at a full-time job. And, you can borrow funds from the account.

3 Simple Steps

Is setting up a Solo 401k a difficult?  No.  Longboat has made the process simple and quick.

  • STEP 1: Solo 401k documents are produced by Longboat and delivered to you.
  • STEP 2: You establish a local bank account to receive existing funds or contributions.
  • STEP 3: As Trustee, you determine best investment options and execute transactions.

Self Trustee

With a Solo 401k, you act as your own Trustee and are charged with investing trust assets prudently and productively. The Trustee cannot co-mingle personal funds with the trust and cannot enter into a transaction with the trust.


You can rollover funds from Traditional IRAs, SEP Plans, previous employer 401k plans, Money Purchase plans, Profit Sharing plans, Keogh plans, Defined Benefit plans, 403(b) plans and Rollover IRAs to initially fund your Solo 401k. You do this by setting up a Trust account for the Solo 401k and directly transferring the funds from the Custodian to the trust bank account.

Making Contributions

For the salary deferral portion in 2011, you can contribute the regular 401k maximum of $16,500 (with an an additional $5,500 if over the age of 50 at year end). And, you can add up to 25% of compensation for the profit-sharing portion. The combined maximum of these contributions can’t exceed $49,000, plus catch-up additions, if applicable. You could also set up a “designated Roth component”, if you desired.

Taking Out A Loan

Our Solo 401k plan document has a loan provision enabling you to take out a loan from your 401k. You can borrow up to 50% of the total 401k value up to a maximum of $50,000, tax free. Repayment of the loan is according to a loan amortization schedule created when the loan is initiated and must be paid back into the account (including interest). It is a simple process with no cost to you, through Longboat software, to create the loan documents.  Failure to make the loan payments may cause a loan default causing taxes and IRS penalties.

A Solo 401k is Not Subject to UDFI Tax

Income to an IRA associated with the financed portion of a property purchased using a non-recourse loan is subject to the Unrelated Debt Financed Income (UDFI) tax. UDFI is a type of unrelated business taxable income.  Solo 401k plans are exempt from this tax.