As investors move their money out of company-sponsored retirement accounts and into individual retirement accounts, they gain flexibility and freedom. Experts say there is a growing trend of money flowing out of 401(k) plans and into different IRAs including self-directed IRAs. Self directed ira providers give investors an edge in today’s complex financial markets. While the trend away from restrictive 401(k) plans has a negative impact on some money management companies, it has a positive impact on investors with a thirst for higher returns. Before moving money from your 401(k) into a self-directed IRA, consider the implications.
Opening up a world of opportunities
When you keep your money in a 401(k) plan, your investment options are typically restricted to mutual funds. Some plan administrators allow you to invest in company stock. However, if the company you work for goes bankrupt, it could wipe out all of your shares. When you rely on a reputable self-directed IRA provider, you don’t have to worry about whether your mutual fund will perform well inside a company-sponsored retirement account. You gain flexibility because you can invest in alternative investments including turnkey real estate, futures trading, domain names, stock options, businesses and foreign currency. Although the IRS prohibits self dealing, the IRS allows you to invest in real estate, loans, private party investments, offshore investments, tax liens and deeds as well as other alternative investments.
Enjoying peace of mind
Another advantage to relying on self-directed IRA providers is the simplicity. Talk to a reputable provider about an IRA LLC setup. If you try to pull out your retirement funds on your own, you could trigger a major taxable event. By working with an IRA provider, you make a trustee-to-trustee transfer between two custodians. Another option is to take out your retirement money, but use the 60 day rollover plan. New tax laws limit the number of rollovers you can perform in a year because people used to take advantage of the 60 day window as an inexpensive way to borrow money. When you work with a good self-directed IRA provider, you know they set up your IRA with special provisions in mind that will not trigger IRS red flags. Because of the scrutiny by the IRS, you need to protect the tax advantaged status of your account to maximize profits
Taking control of your money
Instead of waiting for your 401(k) to recover after a stock market crash or correction, you can enjoy total control with a truly self-directed IRA. After funding your IRA LLC, you invest in the alternative investments that you believe in rather than the dozen or so mutual funds and target-date funds that used to make up your 401(k) portfolio. Your new portfolio will be truly diversified as you get away from just stocks and bonds. True diversification comes when you invest in completely different industries. If you have had your eye on a rental property, now is the time to investigate further. With checkbook control, you can write a check from your self-directed IRA to buy a piece of real estate. The main caveat is that the real estate can’t be used for your own benefit or as a place for relatives to stay. As you receive rental income, the profits get funneled back into your self-directed IRA to grow tax deferred.
At New Standard IRA, we are a self-directed IRA provider with experience in the proper formation of a self-directed IRA. We don’t restrict you to one investment, but open up the doors of opportunity so you can control your own checkbook and grow wealth using alternative investments. For more information on moving money from a 401(k) into a self-directed IRA, please contact us.