Ever since the Individual Retirement Account was introduced back in 1974, investments were usually limited to stocks, bonds and mutual funds.  You would receive a tax deduction on your contributions and see tax-deferred growth of your investments.  Over the last 40 years, many other retirement options have become available including traditional 401k plans. Roth IRAs and Solo 401k plans .  One of the best plans thats not utilized as much is the self-directed IRA .  These plans allow for a broader range of investment opportunities not often offered by brokerage houses.  These include real estate, small businesses and precious metals.

You are the custodian of the self-directed IRA and can choose what type of investments you want to have in the plan.  This will diversify you more than what you will get with a traditional plan using a separate custodian.  With a self-directed plan, you can choose alternative investments that you may be knowledgeable or passionate about.  Interested in the housing market?  You can buy real estate, rental properties and homes.  More of a business man?  You can look into investing in a local business.  Even mortgages and loans can be in your plan.

You can invest in all these types of assets and still receive the tax advantages offered through other financial institutions.  You can even opt for a self-directed Roth IRA.  You dont get the immediate tax break as a traditional plan, but your distributions will be tax-free come retirement.

The question then is: why arent more people doing this?  One of the major pitfalls is whats called self-dealing.  When doing this, you receive double the benefits.  For example, if you buy a rental property, you (or close family members) cannot reside there.  Not only do you get the tax advantage with your retirement account, you double up by staying at the property in your IRA.  Further, come time for minimum distributions, you might not have the available cash to pay out.  Some assets may not be generating enough income or cannot be easily converted to cash.

Also, self-directed IRAs can have higher fees because of the administration and record keeping required to maintain alternative investments.  Finally, these types of investments come with certain risks that more traditional plans do not incur.  Your business investment might flop or the housing market in your area may be on the decline.  You need to factor in much more when investing in these types of assets.

The IRA Financial Group are the leading facilitators of self-directed IRAs.  If youre looking to set one up or have questions, contact the tax experts at 800.472.0646 who will help get you started.  Self-directed IRAs are not right for everyone, but if you have the passions and desire to manage your own retirement savings, they could be the right move for you!

Mar 19

Ever since the Taxpayers Relief Act of 2013 went into effect, many people are looking into Roth 401k plans (if their employer offers the option).  Unlike traditional plans, where you get an upfront tax break and taxes are deferred until you withdraw during retirement, Roth plans are funded with after-tax dollars.  There is no tax break, but so long as you have ad the account for five years and are at least age 59 1/2, all distributions with be tax-free.  Is the Roth 401k better for youor should you go with a Roth IRA ?

To help you better understand, here are the main differences between the two different accounts:

• You can convert any or all of your traditional 401k into a Roth at anytime regardless of age.  This is assuming your plan offers the Roth option and allows in-plan conversion.
• Conversions to a Roth IRA usually must wait until you leave the company or reach age 59 1/2.
• Employer-sponsored plans are better protected from bankruptcy creditors and lawsuits.
• You may borrow from your Roth 401k plan at any time and for any reason
• As with traditional plans, employers will match contributions you make into your Roth 401k