What is the 401k plan? It’s a retirement plan with pretax incentives. Today, there are several types of individual retirement accounts (IRA’s) providing better performance usage of retirement proceeds as investment vehicles. The advantages of traditional IRAs are that they offer a wide range of investments available from stocks, bonds, mutual funds without the tax levies on capital gains, dividends or interest, until a withdrawal is made by the IRAs owner. Today popular IRAs are the self-directed accounts, which share identical retirement goals as a traditional 401K plans. The biggest difference is that the owner of the IRA account gets to make the decisions on how the funds are invested, increasing the value of the IRA account substantially.
Self directed IRA have expanded the investment capacities allowing owners of self directed IRA LLC to invest in real estate, tax liens, loans and even private business. Under the concept called checkbook, self directed IRA owners can participate in these investments, capitalizing without transaction fees. Advantages of using a checkbook or self directed IRA LLC, there are no taxes or distribution fees for the transactions. The owner of the self directed IRA LLC becomes the manager of the self directed IRA account, building up the account funds using tax deferred profits.
Benefits in making the decisions are the ability to invest and purchase nontraditional assets such as real estate in U.S. or foreign locations. Today’s economy presents another remarkable investment for the experienced account owner, mortgage loans, rental properties for residential or commercial or investment expansion of real estate projects. Whether the account owner chooses to purchase foreclosed properties, pay off tax liens or provide capital funding, these tasks can all be done by simply writing a check. As an LLC, there are business advantages for account owners who are active in the selection of investments. One is the increase value to the account portfolio; the other is to find the right custodian who can assist in maintaining proper business practices to ensure maximum growth of the self-directed IRA.
Self directed Roth IRAs, like traditional Roth accounts, do not allow pretax deductions for the account contributions. There are withdrawal advantages for self directed Roth IRA; since the funds have already been taxed, in most cases there are no penalties for distribution of the funds. Self -directed IRA investment selections are made by the account owner removing transaction and holding fees typically charged to the account.