Self-Directed 401(k) Facts and "Secrets"

A 401(k) is one of the most common ways for individuals to save for their golden years. These funds, which are typically started with pre-tax contributions from your paycheck and your employer, are subject to several regulations from the Internal Revenue Service (IRS). Both the IRS and your employer can affect the investment options available to you for these accounts. However, a self-directed 401(k) plan eliminates the constraints on your investment opportunities from your employer.


According to statistical studies, an estimated 10,000 Americans will turn 65 this year, and every year for at least the next decade. This generation, collectively referred to as baby boomers, has begun aging into retirement. Because of this, baby boomers are the new face of retirement. What makes them different from previous generations?

  • Statistics show that baby boomers are typically more educated than previous generations have been.
  • Baby boomers have lived through at least two serious economic downturns that significantly affected quality of life and finances.

Because of this, the baby boomer generation has started to look for ways in which to gain more control over their financial security. This includes their investment portfolios. Self-directed 401(k) plans allows for this type of personal control baby boomers desire. However, not all investment firms work with these type of 401(k) plans. Because they are considered to be specialty accounts, less than 1% of financial advisors understand and willingly discuss self-directed 401(k) plans.


The entrepreneurial spirit found in many baby boomers have led them to grasp ahold of self-employment opportunities. If you and your spouse both work full-time jobs, you likely have 401(k) plans that have been established and managed by your employer. Perhaps you also have your own part-time business as well. Did you know that you, and your spouse, are able to open self-directed 401(k)s? Not only can you transfer the funds from your individual employer-established 401(k), but also finances from a qualified self-employed 401(k) account, can be rolled into a self-directed 401(k). Not only can you create your own self-directed 401(k) accounts, but if desired, you can combine your individual accounts into one, co-invested account. This immediately gives you both a much larger investment pool. A self-directed 401(k) inherently has more investment options than your employer’s version will as well. With your larger investment pool, more personal control, and increased options – your retirement account has a lot of growth potential.

We Can Help

As stated above, self-directed 401(k) are considered to be specialize accounts. As such, not all firms are willing to help manage self-directed 401(k) accounts. Royal Legal Solutions, however, has years of experience with these types of retirement accounts. If you would like to learn more, please contact us.

Last Updated: 
April 6, 2018

Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.

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