Why self-directed IRAs are one of the fastest growing retirement plans
If you ask the common man for advice on which retirement plan to choose, chances are they’ll start counting benefits from a 401k simply because that’s the only plan they’ve known about since then. In fact, the 401k is the most popular retirement plan, but it’s slowly but surely losing fans to the self-directed IRA. People are becoming proactive and asking for more control over their hard-earned money to secure their post-retirement future. The new generation is proving more adventurous than the previous one. It’s very 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 into play. You can invest in your own business and not only earn, but multiply the earnings in your self-directed IRA. Plus, 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 owner. For example, the company you retire 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 must contact your custodian and ask them to approve a transaction before you can pay someone for investment purposes. Think of a time-sensitive 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 get in touch with your brokerage firm in time and get their approval, you’ll lose a lot of cash.
Another limit traditional IRAs impose 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 Treasury bills. 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. Apart from collectibles and life insurance, if you think you can make money from it, invest in it.
The process of opening a self-directed IRA is also very simple. First, you don’t have to pay a dime to roll over your funds from another retirement account. Although it mostly depends on the custodian, most of them will let you do it for free. Your custodian will have physical custody of your money, but if you opt for the self-directed IRA checkbook model, you’ll be in control. You want to opt for the checkbook model if you think you’ll be doing a significant number of transactions over the course of the year. There are many companies that provide self-directed IRA limited liability company creation services.