Choosing the Best Bank for your Checkbook IRA or Solo 401(k) Plan
One of the main benefits of a Checkbook IRA or Solo 401(k) plan is that you get to choose the bank where plan funds are held. That bank is where the “checkbook” is held and becomes the operating account from which you can directly manage plan investments.
While you can certainly just open an account at the bank you use personally, that may not always be the best or simplest option.
You are also not limited to just one bank account within your plan. In some cases, you might need or want to have multiple accounts.
Evaluating your needs and selecting the right banking structure to achieve your goals is an important part of getting the most out of your self-directed retirement plan.
Types of Accounts
Depending on your plan format, you will either have a LLC or trust entity under the umbrella of your plan. You will be the signer for the entity and can establish and operate the entity bank account.
Your plan can establish one or more accounts, including:
- Bank checking and/or savings
- Credit union checking and/or savings*
- Brokerage
- Cryptocurrency exchange
So long as the account is in the name of the entity and tied to the entity tax ID, you are good to go. The account does not reference the underlying retirement plan because the financial institution is not managing the IRA or 401(k) itself. They are just holding a LLC or trust style account.
* Not all credit unions support entity accounts or will see your retirement plan entity as a qualifying member. Some credit unions will hold a LLC or trust account for an IRA-owned entity, but may not open a trust account for a Solo 401(k).
Design Flexibility
You can add or remove accounts at any time. You can also move funds between different accounts within your plan easily. So long as funds stay within the envelope of the plan LLC or trust, no special paperwork or reporting is necessary.
This flexibility allows you to start simple and implement a more sophisticated structure in the future if your needs change.
What Features do You Need?
The types of investments you intend to make with your plan will drive your decisions about what kind of account or accounts to open.
The basis of your checkbook IRA will be a checking account with a bank or credit union. This core account will provide you with features such as:
- Debit cards
- Cashier’s checks
- Electronic inbound deposits
- Online bill-pay
- 3rd party payment apps like Venmo or Zelle
- Separate sub-accounts, such as to hold tenant security deposits if required by local law
Certain investments require specialty accounts. If you want to have the ability to invest some plan capital in stocks or funds, you will need a brokerage trading account. To hold digital currencies requires setting up a cryptocurrency exchange account for your entity.
Many investors will setup a checking account and integrate a stock trading account to keep contingency capital and earnings deployed in conventional assets like mutual funds.
Same or Different Bank?
It can be convenient to use a financial institution you already work with, and many clients go this route.
Keep in mind, however, that your retirement plan must be kept entirely separate from your personal finances. Depending on your temperament and organizational skills, you may or may not want to have your Checkbook IRA or Solo 401(k) account in close proximity to personal accounts.
Using your Checkbook IRA debit card to buy your groceries would be a bad thing.
Several clients choose to use a different bank for their self-directed retirement plan specifically to avoid the risk of an inadvertent mix-up, and that makes good sense.
Banking Across State Lines
You might live in Oregon but be investing in Texas using an IRA LLC domiciled in Texas. This can be confusing for some bankers. Your Oregon bank might want to see your Oregon LLC registration documents, which you will not have and do not need if you are not conducting business that creates an Oregon nexus.
Unfortunately, many bankers do not understand business entity law and are just operating from their checklist. If it says they need to ask for your Oregon LLC documents, that is what they do. They might not open an account for your Texas LLC if you cannot provide the items listed on their checklist. Really. It happens.
The solution is to work with a bank that can easily deal with establishing accounts for a business entity in any state. Most banks can, but it is a good question to ask very early in the process of researching a bank if you are investing outside your own state.
Potential Investment Restrictions
If you have an interest in placing some of your funds into cryptocurrencies, be sure in advance that your bank will support that. Some banks fear the potential of money laundering risk with digital currencies and want nothing to do with the asset class. As soon as you move money from your checking account to Coinbase, Gemini, or Kraken, you can get a letter notifying you of the bank’s intention to close your account.
Another challenge is anything having to do with cannabis. Because federal law views cannabis as illegal, banking regulations prohibit transactions that go into cannabis related activities. While there is no IRS restriction preventing investing an IRA or 401(k) into cannabis associated businesses, it is very difficult to actually fund such investments because of banking restrictions. If you try to wire funds from your plan held account to “Ye Old Weed Shoppe, Inc.”, you may get questions or even a refusal to issue the funds.
Self-Directed Friendly Bank
You should be able to establish an account for your checkbook IRA or Solo 401(k) at most any institution, but it is not always easy. Most bankers are just not familiar with these specialized types of retirement plans and may not understand your needs.
Fortunately, there are a handful of banks that have identified this problem and made a concerted effort to serve self-directed IRA and Solo 401(k) plan holders. Working with this bank can have several advantages and simplify your plan setup.
Because this bank have trained staff familiar with the various plan formats, account setup is easy. They know exactly what type of entity you have and what documents they require to establish the account.
While they are not acting as custodian for a Solo 401(k), they can often assist you in working with another firm to have a rollover sent to your Solo 401(k) held account with them.
They understand self-directed plan accounts can have low activity and provide accounts with low minimum balance requirements and limited fees to suit this type of usage.
Self-directed focused banks make it easy to work with them online and across state lines and are comfortable with most types of investment transactions you might want to execute with your plan account.
At this time, the banks that have specialty divisions focused on self-directed retirement plans include:
Choose What Works for You
Your ability to work with one or more financial institutions of your choosing under the umbrella of your self-directed plan gives you a range of options.
Take the time to think about your investing goals and the needs you will have from a bank, brokerage, or cryptocurrency exchange.
When you can work with banking partners that understand your needs and keep your operating costs low, it simplifies your life and makes your plan that much easier to manage.
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Quick answers to common questions
We’ll take you through a simple, step by step process designed to put your investment future into your own hands…immediately. Everything is handled on a turn-key basis. You take 100% control of your Retirement funds legally and without a taxable distribution.
YES! In 1974, Congress passed the Employee Retirement Income Security Act (ERISA) making IRA, 401(k) and other retirement plans possible. Only two types of investments are excluded under ERISA and IRS Codes: Life Insurance Contracts and Collectibles (art, jewelry, etc.). Everything else is fair game. IRS CodeSec. 401 IRC 408(a) (3)
It’s actually pretty simple. Early on, regulators let the securities industry take the lead in educating the public about retirement accounts. Naturally, brokers and banks promoted stocks, bonds, and mutual funds—giving the impression that those were the only allowed investments. That was never true... and still isn’t. You can probably guess why they kept the rest under wraps.
It is possible to use funds from most types of retirement accounts:
- Traditional IRA
- Roth IRA
- SEP IRA
- SIMPLE IRA
- Keogh
- 401(k)
- 403(b)
- Profit Sharing Plans
- Qualified Annuities
- Money Purchase Plans
- and many more.
It must be noted that most employer sponsored plans such as a 401(k) will not allow you to roll youraccount into a new Self-Directed IRA plan while you are still employed. However, some employers will allow you to roll a portion of your funds. The only way to be completely sure whether your funds are eligible for a rollover is by contacting your current 401(k) provider.
A Solo 401(k) requires a sponsoring employer in the format of an owner-only business. If you have a for-profit business activity – whether as your main income or as a side venture – and have no full-time employees other than potentially your spouse, your business may qualify. The business may be a sole-proprietorship, LLC, corporation or other entity type.
A self-directed retirement plan is a type of IRA or 401(k) that gives you greater control over how your retirement funds are invested. Unlike traditional accounts held at banks or brokerage firms that limit you to stocks, bonds, and mutual funds, self-directed plans allow you to invest in a wide range of alternative assets including real estate, private businesses, precious metals, cryptocurrency, and more.
These plans still follow the same IRS rules and maintain the same tax-deferred or tax-free benefits as conventional retirement accounts. The difference is simply in how and where you choose to invest.
No. Moving to a self-directed IRA or Solo 401(k) does not trigger any taxes, as long as your funds are eligible for rollover.
Self-directed retirement plans maintain the same tax-advantaged status as traditional plans offered by banks or brokerage firms. The key difference is flexibility—our plans are designed to give you greater control and allow for a wider range of alternative investments beyond stocks, bonds, and mutual funds.
A prohibited transaction is any action between your retirement plan and a disqualified person that violates IRS rules and can lead to serious tax consequences. Under IRS Code 4975(c)(1), prohibited transactions include:
- Selling or leasing property between your plan and a disqualified person Example: Your IRA cannot purchase a property you already own.
- Lending money or extending credit between the plan and a disqualified person Example: You cannot personally guarantee a loan your IRA uses to buy real estate.
- Providing goods or services between your plan and a disqualified person Example: You can’t use your personal furniture to furnish a rental property owned by your IRA.
- Using plan income or assets for the benefit of a disqualified person Example: Your IRA cannot buy a vacation home that you or your family use.
- Self-dealing by a fiduciary (using plan assets for their own benefit) Example: Your CPA shouldn't loan your IRA money if they’re advising the plan.
- Receiving personal benefit from a deal involving your IRA's assets Example: You can’t pay yourself from profits your IRA earns on a rental.
If a transaction doesn’t clearly fall within the allowed guidelines, the IRS or Department of Labor may review the situation to determine if it qualifies as a prohibited transaction.
Disqualified persons are individuals or entities that are prohibited from engaging in certain transactions with your IRA or 401(k). Doing so could trigger a prohibited transaction, which may result in taxes and penalties.
Here’s who is considered a disqualified person:
- You (the account holder)
- Your spouse
- Your parents, grandparents, and other ancestors
- Your children, grandchildren, and their spouses
- Any advisor or fiduciary to the plan
- Any business or entity owned 50% or more by you or another disqualified person, or where you have decision-making authority
These rules exist to prevent self-dealing and ensure your retirement plan remains in compliance with IRS regulations.
(Reference: IRC 4975)
Understanding and following these rules can be tricky, but it’s very doable. The best way to stay compliant is to work with professionals who specialize in self-directed retirement plans. They can help you navigate IRS guidelines and avoid prohibited transactions.
If an IRA holder is found to have engaged in a prohibited transaction with IRA funds, it will result in a distribution of the IRA. The taxes and penalties are severe and are applicable to all of the IRA’s assets on the first day of the year in which the prohibited transaction occurred.
Yes. While self-directed retirement plans allow for a wide range of investments, there are a few important restrictions.
You cannot invest in collectibles or life insurance contracts, and you must avoid prohibited transactions—activities that benefit you personally rather than the retirement plan. These include things like buying or selling property to yourself or family members, using plan assets for personal gain, or self-dealing in any way.
Violating these rules could cause your entire IRA to lose its tax-advantaged status. To protect your account, it’s essential to work with professionals who understand IRS regulations and can help you stay compliant.
This is a common misconception. In many cases, professionals may simply be unfamiliar with self-directed retirement plans, as they fall outside their usual scope of work. CPAs and tax preparers are trained to file taxes, not necessarily to advise on alternative retirement strategies. Financial advisors and brokers often work for firms that focus on traditional investments like stocks and mutual funds—and may not benefit from or support alternative options like real estate or private lending.
Self-directed retirement investing is legal under IRS rules—but like any specialized area, it requires working with professionals who understand how it works.
The IRS has rules in place to make sure your IRA is used only for the exclusive benefit of the retirement account—not for personal gain or to help family members. These rules can get complicated because there are many ways a conflict of interest can occur, even unintentionally.
For example, if your IRA buys a house and rents it to your mother, you might be reluctant to evict her if she stops paying rent. That emotional connection creates a conflict between what’s best for your IRA and your personal relationships, something the IRS aims to prevent.
These rules help ensure your retirement account stays compliant and protected. (See IRC 408)
Yes. Most tax-deferred retirement accounts—such as Traditional IRAs, old 401(k)s, 403(b)s, and TSPs—can be rolled over into a self-directed IRA or Solo 401(k), depending on your eligibility. Roth IRAs cannot be rolled into these accounts.
You can contribute directly from earned income, subject to annual IRS contribution limits. The method and amount depend on the type of plan you have (e.g., Solo 401(k) vs. IRA).
To take a distribution, you'll request funds through your custodian or plan administrator. Distributions may be taxable depending on your account type and age. Early withdrawals may be subject to penalties.
For 2025, the Solo 401(k) max contribution limit is $81,250 if age 60-63, $77,500 if age 50-59 or 69+, and $70,000 if under 50. Traditional and Roth IRAs have a limit of $7,000 ($8,000 if age 50+). Limits are subject to IRS adjustments.
Yes. IRA contributions are typically due by your personal tax filing deadline (e.g., April 15). Solo 401(k) contributions follow your business tax filing deadline, including extensions.
IRS reporting requirements vary depending on the type of self-directed retirement plan you have. Here’s a quick breakdown of what you need to know
Please note: Our team can help you understand what’s required for your specific account, but we don’t provide tax or legal advice. We always recommend working with a qualified tax professional to ensure full IRS compliance.
Self-Directed IRA (Traditional or Roth)
- Form 5498 – Filed by your custodian each year to report contributions, rollovers, and the fair market value (FMV) of your account.
- Form 1099-R – Issued if you take a distribution or move funds out of your IRA.
- Annual Valuation – You'll need to provide updated FMV for any alternative assets held in the account, such as real estate or private placements.
Solo 401(k)
- Form 5500-EZ – Required if your plan assets exceed $250,000 as of year-end. Must be filed annually by the plan participant.
- Form 1099-R – Required if you take a distribution or roll funds out of the plan.
- Contribution Tracking – Keep records of employee and employer contributions. These are not filed with the IRS but may be needed for tax reporting or audits.
SEP IRA
- Form 5498 – Filed by your custodian to report contributions and FMV.
- Form 1099-R – Filed by your custodian. Issued for any distributions.
- Employer Contributions – Must be reported on your business tax return (and on employee W-2s, if applicable).
Health Savings Account (HSA)
- Form 5498-SA – Filed by your HSA custodian to report contributions.
- Form 1099-SA – Filed by your HAS custodian. Issued for any distributions.
- Form 8889 – Must be included with your personal tax return to report contributions, distributions, and how funds were used.
