Self-Directed IRAs and Solo 401k's have excellent benefits, the major benefit being that it gives you control over your financial future by allowing you to choose where you invest your retirement funds. This is great for people who educate themselves on Alternative Investments to know their options and how each investment benefits their portfolio.

3 Benefits of Self-Directed IRA

1. You have built-in tax breaks on what you earn from your investments.
2. The opportunity to diversify some of your funds into Alternative Investments.
3. Limited Liability which keeps your outside assets "shielded from an attack."

3 Benefits of Solo 401k

1. Protected from Creditors
2. Higher Contribution Limits
3. Roth Savings Option

Major Differences Between Solo 401k & SDIRA

With the Solo 401k, you can save up to 100% as an employee contribution, which tends to be more favorable for self-employed individuals. You can invest in Alternative Investments just like with a Self-Directed IRA. Another major difference is that you don't need a third-party custodian.

This is because you become your own trustee upon opening a solo 401k. This gives you control over your investments just like if you were to have opened a self-directed ira. You can borrow up to $50,000 or half of the account balance from your solo 401k, whereas with a self-directed ira, this is only possible with some form of a loophole.

Summary

The major difference between a Solo 401k and Self-Directed IRA is the ability to borrow from your solo 401k for your business, whereas this isn't possible with a self-directed ira. Both have pros and cons, so choosing the one for yourself is all about what benefits your current and future needs. You can even choose to set up both if you would like.

‍