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
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