Menu Close

IRA Financial Group Blog

Self-Directed Retirement Accounts and You

3 Minute Read

There are options for those looking for a self-directed retirement account.

Key Points
  • Anyone can open a Self-Directed IRA
  • A Solo 401(k) is the best plan for the Self-Employed
  • By self-directing your retirement plan, you can invest in almost anything!

Traditional Retirement Accounts

Many people who are employees of large companies have an IRA or 401(k) to save for retirement, using an organized plan set up by the corporation that they work for. They have regular deductions taken out of their paychecks, at specific intervals. These account are traditional, and make traditional investments in stocks, bonds, mutual funds, etc. And while there is great value in making certain preparations for retirement are being made, with the current unrest and volatility it may make sense to diversify portfolios to encompass a broader range of options.

Self-Directed Retirement Accounts

For those who are interested in having more control over their funds, or those who are solo entrepreneurs, a self-directed retirement account can be the answer. Self-directed IRAs and Solo 401(k)s can offer a number of advantages to those looking to save for retirement outside of traditional investments.

Self-Directed IRA

A Self-Directed IRA can be custodian controlled or checkbook controlled. For those who are not interested in large numbers of transactions, or those who do not need rapid action, the custodian controlled account can work very well, as the investments still require custodial consent.

A checkbook control Self-Directed IRA establishes a special purpose LLC and as manager, you have the authority to make investment decisions on behalf of your IRA without the consent of a custodian. When you establish a Self-Directed IRA LLC, you can make all types of Self-Directed IRA investments if they are IRS approved. The Self-Directed IRA LLC offers one the ability to use his or her retirement funds to make almost any investment without requiring the consent of a custodian. All decisions will be yours.

When holders of a self-directed retirement account want to make rapid decisions, checkbook control is vital. It allows investors to make real-time decisions without needing to go through a custodian or gatekeeper.

Solo 401(k)

A Solo 401(k) plan is a 401(k) qualified retirement plan that was designed for self-employed individuals and small business owners with no full-time employees, excluding a business partner and spouse. Much like the traditional 401(k), this unique plan encourages individuals to save for retirement in a tax-advantaged environment. When participants contribute funds into the Solo 401(k), taxes on the funds will be deferred until the participant takes a qualified distribution.

The Solo 401(k) Plan (also known as the Individual 401(k) Plan) is an IRS approved type of qualified plan. It’s a popular plan created by the Congress and IRS. The purpose of this plan is explicitly to benefit any business with zero employees except for the owners. The owner can establish their business as a sole proprietorship, LLC, corporation or partnership.

You may also know of this retirement plan as the “one-participant plan 401(k).” This isn’t new. In fact, it’s just like the Traditional 401(k), except it only covers one person. It became more popular in 2002 when the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) came about.

Alternative Investments

Besides traditional options, a self-directed retirement account can enable investors to reach out and invest in alternative options that are not prohibited by the IRS. Traditional investments include bonds, funds and stocks. Alternative investments can include real estate, cryptocurrency, and precious metals.

  • Real estate can be rental properties, condominiums, hotels, land deals, and more.
  • Cryptocurrency can be held because the IRS considers it property
  • Precious Metals

What alternative investments can do is help prevent too much reliability on the stock market which can be volatile and subject to current unrest. Alternative investments allow an account holder to invest in what they know best, using their own special skills.

Self-directed retirement accounts are gaining in popularity as investors want to have feel they have more control over their future. Often, traditional custodian accounts do not allow holders to invest in the multitude of alternative options that are currently available. With a Self-Directed IRA or Solo 401(k) with checkbook control, the holder can make rapid decisions and control their own financial future.

For more information about self-directed retirement accounts, give us a call at 800.472.0646 today!

Related Articles