If you ask the common man for advice on which retirement plan to choose, chances are you’ll start counting the benefits of a 401k simply because that’s the only plan they’ve known about since. In fact, the 401k is the most popular retirement plan, but it is slowly but surely losing adherents to the self-directed IRA. People are becoming proactive and asking for more control over their hard-earned money to secure their future after retirement. The new generation is proving more adventurous than the previous one. It’s so easy to spend 40 years at a desk doing a nine-to-five job and retire with a 401k.
People are no longer satisfied with this. They want to be entrepreneurs. They want to start a business, work hard at it, and reap the benefits. This is where the self-directed IRA comes in. You can invest in your own business and not only earn, but multiply the earnings in your self-directed IRA account. Also, unlike traditional retirement accounts, you don’t need anyone’s permission to make an investment transaction. All you need to do is sign the check. No need to contact your custodian and forget about paying absurd transaction fees.
A 401k places too many limits on the account holder. For example, the company you are retiring from has the final authority to choose the brokerage firm that will have physical custody of your retirement funds. If this is not enough, you should contact your custodian and ask them to approve a transaction before you can pay someone for investment purposes. Think of an urgent opportunity, where you have to pay in a few minutes to take advantage of the opportunity to invest in a lucrative business. If you can’t contact your brokerage firm in time and get their approval, you risk losing a lot of cash.
Another limit that traditional IRAs place on their clients is the number of investment options. With a 401k or Roth IRA, you can only invest in stocks, bonds, mutual funds, CDs, and treasuries. However, with a self-directed IRA, the field is wide open and you can invest in just about anything you think will make a profit for you. Aside from collectibles and life insurance, if you think you can make money from them, invest in them.
The process of opening a self-directed IRA is also very simple. First, you don’t have to pay a penny to transfer your funds from another retirement account. Although it depends mostly on the custodian, most of them will allow you to do this for free. Your custodian will have physical custody of your money, but if you opt for the self-directed IRA checkbook model, you will be in control. You want to use the checkbook template if you think you will have a significant number of transactions throughout the year. There are many companies that provide the services of establishing self-directed IRA limited liability companies.