Self Directed IRA Risky or Smart?

If you ask a bunch of investment professionals whether you should be investing in self-directed IRAs you are going to get mixed results. This is because some think it’s a great idea and others think that it’s just too risk for the average person to do on their own. I happen to agree more with the latter set of investors, but that doesn’t mean that a self-directed IRA would be a risky decision for you.

Even though I believe that the average person would be hard-pressed to earn a good return on an investment they make in a self-directed IRA, that doesn’t mean that you’ll be. If you are an above-average investor or you are willing to work hard enough it is very possible to earn a great return off of investments that you choose yourself.

The first thing that you should do when trying to decide if this is the right path for you is to think about your skill set and how that helps to make you a better investor. If you have a very good understanding of any particular industry that’s a great place to start. For instance if you worked as a contractor all your life and know a great deal about houses you may be able to build your retirement account investing in real estate. If you worked at a bank denying or approving loans for new businesses you may have the knowledge required to invest in new companies who need capital to grow. The more applicable knowledge that you already have, the better your odds are of being successful with self-directed IRAs.

You also have to consider how hard you are willing to work to make your investments pay off and how much time you can commit. If you have all the time in the world to learn about a new type of investment, there is no reason that you can’t be successful with it. However, if you can only put in an hour or two a week learning new concepts and studying you will have a hard time achieving the level of expertise needed to make good investment decisions.

Hopefully now you have a better idea of whether or not investing in a self-directed IRA is a good move for you. For many people it is a bit risky, but if you have faith in your ability to choose a good investment then there is no reason to believe that you can’t earn a sizable return for your retirement account.

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Self Directed IRA Risky or Smart?

Inside Secrets of the Self-Directed IRA

If you are worried about spending your post-retirement life, or the golden years of your life as they call it, comfortably and worry-free, then you are not alone. It is perfectly normal to worry about the future, especially in the economic situation as it is. But it doesn’t have to be this way. With a self-directed IRA retirement account, you can say goodbye to those worries, and rest assured that your post-retirement life will not only be comfortable but luxurious. It all depends on how good an investment decision maker you are. Confused? Let me explain.

Did you know that you can invest on anything on a tax-deferred basis using your retirement account? Well, not just any retirement account, but specifically a self-directed IRA. That’s right, one of the secrets of this retirement plan is that you are allowed to invest in any business, real estate, stocks, bonds and mutual funds. In fact, anything that seems profitable to you, you are allowed to invest in it, as long as it is not alcohol or collectibles.

The reason you didn’t know about this is that this retirement plan, for obvious reasons, is not as publicized as the traditional ones. In fact, many people think that the 401k is the only retirement account available because that is what they heard. Not too many people bother to research into this.

Another well-kept secret of the self-directed IRA is that you have the option to have “checkbook control.” This means that it would be you, not your custodian, who would decide who and when to pay. This is especially useful for time-sensitive opportunities, where you can just sign the check and conduct the transaction. This also means that you don’t have to pay the absurd transaction fees that other retirement account holders have to pay.

Many people also believe that once funds are transferred into a self-directed IRA, you can’t withdraw or “borrow” from it until you reach the age of retirement. You can certainly borrow from your account, though you would have to pay a small percentage of the money you want to withdraw. Remember that depending on the custodian, there is a fixed annual fee that cover the maintenance charges of the self-directed IRA account.

Now that these secrets about the self-directed IRA have been uncovered, is there still a reason not to start one?

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Inside Secrets of the Self-Directed IRA

The Truth about Self-Directed Retirement Accounts

Interest rates have been at an all-time low recently and that has many investors looking for new ways to generate money for their retirement accounts. One of the most talked about investment options today is a self-directed retirement account. Many people say that these accounts are risky and that they make bad investments. The truth is that you can make money using this investment but you have to do it carefully. Learn more about what is involved to see if it is right for you.

Most people are quick to judge a self-directed IRA as being a very risky move because they have probably heard a horror story about a friend who lost his whole retirement making a poor investment. This is definitely a possibility, but that doesn’t mean that good investments can’t be made. That’s like saying that the stock market is a poor way to invest your money because people have lost their entire savings investing in the wrong company.

In order to make self-directed retirement accounts pay off for you, you need to make a good investment. The investment could be in real estate, in a new start up that you believe in, or even in your neighbor’s business. Just make sure that you do plenty of research about the investment before you commit to it and only invest if you are confident that it will pay off over time.

To be successful with a self-directed IRA or SDIRA you should have a lawyer working with you and you need a good custodian to manage your money. The custodian is necessary to make this type of investment at all, the lawyer is helpful to keep you out of trouble. Since this type of investment is so free and open there are lots of rules and regulations around it. If you aren’t very well-informed you could break one of the rules and be hit with a stiff penalty that crushes your retirement fund.

As long as you do your research and hire a good lawyer to help verify your investment plan you shouldn’t have a problem expanding your retirement account with a SDIRA. The next time someone says that handling your retirement funds on your own is dangerous; just tell them that it is only as dangerous as the investment you make and that you do your research before risking anything.

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The Truth about Self-Directed Retirement Accounts

The Top 4 Facts You Need to Know About Choosing a Custodian

Choosing the right custodian to manage your investments can make the difference between having a profitable investment fund and one that is actually sapping money from your retirement. When it comes time to pick the custodian you are going to be dealing with there is a set of questions that you need to ask them to make sure you are getting the best deal that you can be. Learn what to expect from a good custodian and you can evaluate each option that you have until you find the right professional to work with.

Watch Out for the Fees

Different custodians charge different fee rates and some have more fees than others do. Before you begin working with any custodian get a list of his fees so you know what you can expect. It’s pretty amazing how much of a difference you will see between one custodian and another by doing a bit of research.

Focus on the Investment Options

If you are going to invest in stocks and bonds without really worrying about making any other investments then you probably don’t care about the different options that your custodian has for you. However, the more specialized the investments you want to make are, the more you really need to think about what custodian you are going to be working with. A very flexible custodian gives you the opportunity to branch out more if you decide to do so later on without having to worry about finding another custodian to work with as well.

You are On Your Own

When it comes to choosing your investment opportunity it is really up to you to figure out which is the right one to go with. Just because a custodian says he has a great opportunity for you doesn’t mean that you should believe him. Most custodians don’t have any interest in helping you make money and instead are doing something that is going to serve them.

Customer Service is Vital

Since the custodian you choose to work with is in charge of your money you need to make sure that they are going to be easy to work with and that they will be there when you need them. Make sure they have a toll free number that you can call when you need help or information. Also look into how closely you will be able to monitor your investments. It is important that you can see exactly what is going on all the time because it is your money that they are working with.

Hopefully you’ll be a little more sure of what to look for when deciding on a custodian now. What seems like a simple decision is actually quite complicated, and without knowing key pieces of information such as the investment options that they offer as well as the level of control you have over your money you really can’t choose the best custodian for you.

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The Top 4 Facts You Need to Know About Choosing a Custodian

How to Transfer Funds from a 401k to a Self-Directed IRA

If you have just discovered the self-directed IRA and were satisfied with a 401k for a long time, don’t worry because this is a very common mistake. Also, it is never too late to make the right decision for the planning of your post-retirement future. Obviously, you have figured out the advantages of having a self-directed IRA rather than a number of 401k accounts.

According to statistics, a rollover of funds from other accounts to a self-directed IRA occurs most often when the investor reaches the age of retirement or is separated from their last job for any reason. A less common reason is that the person receives either cash or assets or both. In this case, only 60 days are given to the investor to complete the rollover.

One of the major advantages of choosing a single self-directed IRA rather than having a number of 401ks set up by ex-employers is an increase in flexibility. Additionally, you will no longer be restricted to the rules and policies defined by your former employer’s retirement plan. By transferring your funds from your current retirement plan to a newly-created self-directed IRA, you will maintain the tax-deferred status of your retirement funds and you will also not be required to pay any taxes on your profits until you withdraw the money.

If you ask your employer-sponsored retirement plan to write a check to fund your new self-directed IRA account, you will be liable to pay 20% of the amount you want transferred in the name of taxes. By requesting a direct rollover to the IRA, you can do away with the withholding tax and also the risk of missing the 60-day deadline.

Regardless of whether you are retiring, switching jobs, or keeping yourself away from work for any other reason, leaving a workplace can be the perfect opportunity to reevaluate where you stand as far as retirement funds are concerned. The process of rolling over to a self-directed IRA can seem like a cumbersome task, but do not be intimidated. It’s literally as simple as 1, 2, 3.

1. Contact your current plan administrator and after getting the distribution packet, fill out the paperwork and select a direct rollover to your new self-directed IRA account holder.

2. If you do not already hold a self-directed IRA account, you’ll have to do that first. That too is quite simple; you just have to follow the instructions in the new IRA opening kit.

3. Come back to the completed forms in the distribution packet of your previous plan administrator and complete the formalities.

The time it typically takes for funds from an employer-sponsored retirement account to a self-directed IRA is 3 to 6 weeks. A rollover from one IRA to another one takes even less time. According to IRS regulations, an individual is entitled to rollover funds from one IRA to another just once in a twelve month period.

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How to Transfer Funds from a 401k to a Self-Directed IRA

How to Invest in Precious Metals with Your Retirement Fund

Today most IRA accounts invest in low-interest ventures and for that reason they don’t generate much return other than what you put in the account. Sometimes the accounts can’t even keep up with inflation, and that is truly concerning. Some investors have been investing in precious metals as a more lucrative option than the fixed-income investments and it’s entirely possible to do this using a self-directed IRA, but it will cost you.

If you decide to diversify your retirement account more by investing some of your money in precious metals you need a custodian or administrator that will let you make such an investment? Any of the banks or brokerages that allow this type of investment often call the accounts self-directed IRAs or SDIRAs. SDIRAs come along with more start up and maintenance fees than standard IRAs do and that is because you are requiring the custodian to do more work by setting one of them up.

Your custodian will have to purchase the gold or silver, or whatever precious metal it is that you want with your IRA funds and then hold onto them for you until you are ready to cash them in after retirement. This is a vital concept to understand if you hope to avoid getting hit with fees. Your custodian has to hold the metals at a location designated for your account. You cannot use your IRA money to buy precious metals and then store them in your home.

But having a custodian buy all of this gold or platinum for you and then store it as well is not a free service that he will do out of the kindness of his heart. You will have to pay to have your account setup and then will have to pay a yearly maintenance fee and probably a storage fee as well. All of these fees add up and that is why you have to be careful with your purchases.

Of course investors will try and choose precious metals that are going to increase in value over time, but there is no way to know that they will. Investing in precious metals is a good way to protect your overall portfolio, but you shouldn’t invest all of it this way. Instead only invest a portion of your money in precious metals and keep the rest of your money in other investments.

You will make your portfolio safer and giver yourself more opportunities to earn returns on your investment. If something does go wrong with one of your investments you will have several others to fall back on. Just make sure you read up on the rules involved with purchasing precious metals with your IRA before making a move and you should be fine.

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How to Invest in Precious Metals with Your Retirement Fund

Top 3 Advantages of Self-Directed IRA's

If you have made the decision of going for a self-directed IRA rather than any of the traditional retirement plans, you can rest assured that you are in safe hands and you can retire with a lot more money than many of the other folks out there. The advantages of a self-directed IRA may not be readily apparent, but as you start researching about it, you find yourself wondering what the need for any of the other retirement accounts is. Listed below are the top 3 benefits that owners of self-directed IRAs are entitled to.

1. You get “checkbook control”

Owners of the traditional retirement accounts have to contact their custodian before making investments and can push through with the transactions only after the firm approves of it. So making investments on public holidays is not an option as the custodian will under most circumstances not be working on those days. With a self-directed IRA, you can choose to take possession of your own checkbook and conduct transactions whenever and wherever you feel like. In the event that you think your custodian can make better investment decisions on your behalf, you can let them keep possession of your funds. This option may incur transaction fees, though.

2. You can invest in anything that seems profitable

Forget about the boring old stocks, bonds and mutual funds. If you want to invest in a small business that appears it’s about to hit it big time, you can buy its shares and the profits will go straight to your retirement account that you can use once you are retired. You can also withdraw the cash before the age of retirement by paying a small penalty. If you think you can predict the prices of real estate in a certain area go ahead and buy it. There are a few restrictions, however, that have been put in place by the IRS. For example, you can’t invest in the same residence that you are living in. And you can’t invest in collectibles and alcohol, among other items.

3. All your investments will be tax-free

If you have been in the real estate investment business for a few years, you would know that it is impossible to legally invest in a piece of land without paying annual taxes for it. After paying those absurd amounts of taxes and selling the piece of land, you would be lucky to break even. Those days are long gone, with the advent of the self-directed IRA. You can enjoy tax-free profits in not just real estate, but practically any business, as mentioned in the previous point.

At the end of the day, the self-directed IRA is one retirement plan that will give you the chance to retire rich. You don’t need to worry about your post-retirement days as you will have enough money by the time you retire to keep not only yourself but your whole family happy in your golden years.

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Top 3 Advantages of Self-Directed IRA's

The Difference between a Traditional and Self Directed IRA

If you’ve heard about self-directed IRAs you’re probably wondering how they are different from traditional or Roth IRAs. The answer is they are different in many different ways such as the investment opportunities that they allow, their fee structures and the amount of time that you have to invest in managing your account.

One of the major differences between traditional IRAs and self-directed IRAs is the range of investment options that you have available to you. The standard IRA account will let you invest in many stocks, bonds or mutual funds. You will often get a choice of what you want to invest in, but only the things listed by the custodian you are dealing with. The self-directed IRA gives you many more options to choose from and often lets you choose an investment type that isn’t on a list of items at all. With a self-directed account you can invest in real-estate, precious metals, tax liens, currency or a new business down the road as long as you don’t have a stake in the company. As you can see you get a lot more variety in the investments that you can make using a self-directed option.

You will be charged fees with either IRA type that you decide to use, but there is a good chance that one type will charge more in fees than the other. Traditional IRAs usually charge you to set up the account and then they will charge a yearly maintenance fee for all the work that is done on your behalf.  Self-directed IRAs charge those fees and you also have to pay transaction fees to your custodian each time that you want to make a new investment. These fees can really start to add up if you are making investments on a regular basis. You can avoid most of these fees by relying on a checkbook style self-directed IRA, but many industry professionals are concerned that the IRS is going to begin penalizing these types of accounts because it doesn’t like them.

The last difference that you will notice between the two types of IRAs is your level of involvement. When you use a traditional form of the IRA you are picking out the investments that you like and leaving it at that. From there on out the professionals handle the account and you just put more money into it. This isn’t how a self-directed IRA works. Instead you will be picking out your investments and then deciding how to precede every step of the way. You will have to make investment decisions down the road and you will need to be very careful with what you choose to do because you are the professional in charge of your money.

A traditional IRA is very different from the more modern self-directed option. Some people prefer one to the other, but each has its own purpose and can be very useful when utilized properly.

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The Difference between a Traditional and Self Directed IRA

Discover How to Buy a Home Using Your Retirement Account

If you are trying to come up with the money for a house for retirement you may be able to use your retirement account to fund the purchase. You just have to be very careful to follow the rules and regulations when making the purchase, and realize that you are not going to be able to use the house until after you retire.

With what is known as a self-directed IRA you can put the money stored in an IRA toward purchasing a piece of property. That means that you could track down a retirement house that you really like and use the account to buy it with. Many people use this method to purchase houses in affordable foreign countries that they want to retire in.

There are a few stipulations involved with this type of transaction that you have to be aware of though. First and foremost is that you can’t benefit from this house in any way until after you reach 59 years of age. That means you can’t live in the house, work on the house, or let family or friends live in the house until after that point. If you do break this rule you put yourself at risk of a stiff penalty from the IRS.

If you want to go through the steps to acquire a home in this manner then you will have to set up a self-directed IRA with a bank and have them purchase the house for you. You can fund a new IRA account by simply rolling over your funds from existing accounts that you have. This only takes a few weeks and is usually the way that people fund their self-directed accounts. If you don’t have enough in your account or you want to save up more money you can also make your yearly contribution into the new account to put toward your house.

When you buy the house you are free to rent it out to other people as long as all of the money that you make from renting it goes back into the IRA account until retirement. This is an ideal way to hold onto the house since you will have to pay a maintenance fee to have the account open anyway.

As long as you are careful to follow all of the guidelines, you could purchase a home for retirement with your retirement account, and have it waiting for you when you reach 59 years of age.

Discover How to Buy a Home Using Your Retirement Account

What is The Quickest Way To Open a Self-Directed IRA?

So you have finally made the decision that you want to live your post-retirement days worry-free by opting for a self-directed IRA. You have done your research and now want to know the procedure to open up an account for yourself. At this point, you might want to know that most brokerage firms charge no fees for rolling over funds from another retirement account to a self-directed IRA. Before moving further, you should know that wherever there is money, there are fraudsters and stammers. You should be very careful throughout the process and at no point should you let your guard down. Read on to know what to do to get your account up and running.

First, you would want to visit a few firms that offer the services of maintaining self-directed IRAs. If you want to open a self-directed IRA to invest in real estate, you should verify this with the firm because some of them do not allow real estate investment despite offering a self-directed IRA.

You should keep yourself informed of the rules outlined by the Internal Revenue Service (IRS). The specific passages that you would want to go through are IRS Publication 590 and Internal Revenue Code Section 408. This is where you can find the laws of investment in real estate with an IRA, outlined by the United States government. One of those rules is that the property must not be a residence and that the profit gained must remain in your IRA until the age of retirement.

After you have landed on a specific brokerage firm and verified their legitimacy, it is time to open your account. Fill out a predefined form and provide all the required details. This information typically includes your name, date of birth, address, Social Security number, and a beneficiary name.

According to IRS regulations, IRAs cannot be used as collateral for a loan. This means that you will not be allowed to take out a mortgage on your purchased property. You will need cash to buy the property and the cash should come from your IRA.

Remember that you have to use the services of an outside agent. Using the money in your self-directed IRA, you must hire someone whose duty would be to collect the rents and perform maintenance works on your real estate. IRS regulations do not allow the self-directed IRA account holder to manage the property on behalf of the IRA.

Do not forget that technically, the owner of the account is the IRA. You have to monitor all cash flows because all money, whether coming in or going out, will be flowing through the account. Money to buy and maintain the property must come from the IRA and all rents and income generated by the real estate must be stored in the very same account.

It merits mentioning again that you must be careful of every step you take because if you fail to follow even the small guidelines of the IRS, you might lose your tax-advantaged privileges, meaning you will be liable to pay tax and potential penalties on the entire amount of the self-directed IRA.

What is The Quickest Way To Open a Self-Directed IRA?

What is a Safe and Easy Way to Invest In Real Estate?

Many people think of investments as a side job. It is a common perception that it is just a money-generating mechanism that requires no time or looking after. Though this might be true in most cases, it is not for real estate. To fruitfully invest in property, one has to donate a considerable amount of time and money. In return, the real estate investor will earn higher levels of profit, compared to the traditional, stocks bonds and mutual funds. If you are wondering whether it is possible to invest in real estate using a retirement account, the answer may surprise you. Most Americans like to stick with the 401k that their employer sets up for them and are satisfied with low returns. But that doesn’t mean you should do the same.

With a self-directed IRA, not only can you invest in a wide range of commodities, but you also have full control of your money. This means that, unlike traditional retirement accounts including the 401k, using the checkbook model of the self-directed IRA, you can pay anyone anytime for investment purposes using the funds in you self-directed IRA account.

Of course, wherever there is money involved, you can’t be too sure of what you are doing. Luckily, there are many ways to verify the legality of financial institutions who offer services of opening up a self-directed IRA. Once verified, you should take a look at the regulations of the IRS pertaining to the investment in real estate using a self-directed IRA.

One of the most prominent rules is that the property that a self-directed IRA account holder wants to invest in must be only an investment property and not a residence. Another frequently forgotten rule is that the money for the purchase of the real estate must come directly from a self-directed IRA and the profits gained must stay in the account until the age of retirement.

It is okay to provide the brokerage company with personal information such as date of birth, address and Social Security number as this information is required for the pre processing of your self-directed IRA account.

While filling out the application form, you can choose whether “checkbook control” stays with the custodian or is handed over to you. If you take it upon yourself to make payments for potential investment opportunities, you would want to go for checkbook control. This will do away with the need to call your custodian every time you want to make an investment. Also, you will have to pay no transaction fees.

Remember that it is not only real estate that you can invest in using a self-directed IRA. Anything that has the ability to generate profits is considered an investment option for the self-directed IRA account holder. Whether it is gold bullion, real estate or a small business, open up a self-directed IRA and start reaping the benefits.

What is a Safe and Easy Way to Invest In Real Estate?

Closely-Guarded Secrets Big Financial Institutions Don't Want You to Know About Retirement

Most people looking for a retirement account go for the traditional 401k, simply because that is all they know and that is everything they have been taught by the people before them, and they just do not know any better. It is the employer that has to do most of the work in setting up the account and all the retiree has to do is collect the small profits. But you don’t have to settle for that. You can do so much more for yourself by getting self-directed IRA. But the reason this particular retirement plan is not so much in the mainstream is that its advantages, all of them authorized by the Internal Revenue Service (IRS), are well hidden by the big time financial institutions. Below is a list of the facts, you probably didn’t know about self-directed IRAs.

You can own real estate in a retirement account

The folks with a 401k wouldn’t believe this because, well, it is true in their case. You are not allowed to invest in anything other than stocks, bonds, mutual funds and treasuries if you have a 401k. With a self-directed IRA, however, you can invest in anything that you want (except collectibles, alcohol and a few other items). Think gold bullion will earn you a good profit? Invest in it. Small business? Check. To invest in real estate, just start up a self-directed IRA account and start. What is more, you get to keep the money in your account on a tax-free basis.

You can open up more than one self-directed IRA

Suppose you screw up one of your accounts by making an illegal transaction and end up having to pay taxes and penalties on the entire amount you have on that account. Nobody wants to be in that situation. Be on the safe side and start a couple of accounts just to keep away from the penalties that you could be liable to pay.

You can borrow money from your self-directed IRA

Many people think that once you transfer funds to a self-directed IRA, you are not allowed to withdraw from it until the age of retirement. That is not true. You can borrow money from the account as and when you please by paying the custodian a small percentage of the fee. Also, the money that is out of your account will be taxable, so you might want to return it at the earliest.

You don’t need to pay transaction fees

Unlike most of the traditional retirement accounts, you don’t have to pay fees to conduct transactions for the purposes of investment. You can choose to have control of your own checkbook and invest whenever and wherever you like, without asking for approval from your custodian. There is however, a nominal annual fee that you cannot do away with.

After knowing about these secrets, there doesn’t appear to be any reason why not to open up a self-directed IRA account and start reaping the benefits.

Closely-Guarded Secrets Big Financial Institutions Don't Want You to Know About Retirement

3 Facts You Didn't Know About Self-Directed IRA

Have you finally made the decision to open up a retirement account? Your next step is to decide which particular account to go for. They all have their advantages and disadvantages, but it seems some retirement accounts are more favorable than others. It all depends on what you want to use the money for. If you want to invest in the traditional stocks, bonds and mutual funds, then you want to select the good old-fashioned 401k. If, however, you are more of a risk-taker and want to take your chances in earning higher profits by investing in real estate or a small business, then a self-directed IRA is what you are looking for.

Here are a few facts that you probably didn’t know about self-directed IRA:

1. You can conduct transactions as and when required

According to rules laid down by the Internal Revenue Service, every retirement account, including self-directed IRA must be held by a qualified custodian. The traditional retirement accounts require that you contact your custodian every time you want to make a transaction for investment purposes. There is a small fee for every instance which quickly adds up the more transactions you make. With a self-directed IRA, you have the option of having the checkbook in your own two hands. This eliminates the need to establish contact with a custodian and also does away with transaction fees.

2. You can transfer funds from other retirement accounts to a self-directed IRA without penalties

One of the reasons why the self-directed IRA is one of the fastest growing retirement plans is the lack of penalties for the rollover of funds from other accounts such as a Roth IRA or a 401k. Unlike those other retirement plans, you do not have to pay a single cent to transfer your funds to a self-directed IRA.

3. You can invest in almost anything that you think will earn you a profit

Gold bullion, a small business or a piece of land, Take your pick. As mentioned in the introduction, you can use the funds placed in a self-directed IRA to invest in anything that appears profitable to you. There are few restrictions in place, but it is unlikely you will have to deal with them. For example, you cannot personally use the property that you have invested in. Also, life insurance, alcoholic beverages and collectibles are off-limits.

A self-directed IRA is perfect for folks who consider themselves as experts in a certain field of business and consider themselves in some position to predict exactly when a certain business will be making profits. So if you consider yourself a person who can take a few calculated risks to live a comfortable post-retirement life, feel free to open up a self-directed IRA account. Remember that different brokerage firms have different conditions and price ranges, and you might not want to go for a certain custodian based solely on their low price.

3 Facts You Didn't Know About Self-Directed IRA

4 Reasons Why a Self-Directed IRA is Better than a 401k

First things first, you need to know what a retirement plan is. It is a financial account, similar to bank account that holds funds for an individual to be used after retirement. It is considered as one of the safer and more efficient ways of saving up for retirement. However, one can get easily puzzled by the sheer number of choices available. Probably the most popular one is the 401k, in which profit is earned by investing in the likes of stocks, bonds, mutual funds and treasuries. A self-directed IRA is a lot more flexible in this regard as it allows the account holder to invest in anything that seems profitable. Here are 4 reasons why a self-directed IRA is better than a 401k.

1. Invest in anything you like

As mentioned above, you can choose what you want to invest in. Know of a small business that your instincts tell you is about to go big? Invest in it. Think you can earn higher profit margins in real estate? No one is there to stop you. Your options are quite limited with the 401k.

2. You have “checkbook control”

Unlike the 401k, where you have to contact your custodian every time you want to buy new stocks or bonds, with the self-directed IRA, you can choose to take possession of your own funds. This means faster transaction processing times and the elimination of the sky-high transaction fees. This feature is particularly useful for time-sensitive investment opportunities.

3. You can start your own account

Whether you are working or retired, you can open your own self-directed IRA account. In the case of the 401k, you need to be self-employed (business owner) to open your account, or if you are working, you will have to contact the HR department of your employers to get this account up for you.

4. You can roll over your funds from another retirement account for free

If you already own a retirement account and want to switch to a self-directed IRA, you can do so without paying a single cent. The whole process is smooth and efficient and you can open your self-directed IRA and start investing in almost no time.

4 Reasons Why a Self-Directed IRA is Better than a 401k