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Advantages of 401K and IRA : The Best Retirement Investment Options

By on March 14, 2016

“Financial literacy is an issue that should command our attention because many Americans are not adequately organizing finances for their education, healthcare and retirement.” (Ron Lewis)

Advantages of 401 K and IRA

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When it comes to retirement planning, it is essential to consider all avenues of investment before settling for one. There are different types of investment options available in the market that can reap huge gains for your retirement years.

Some plans that have gained a huge demand in the market are:

  • Solo 401K
  • Self Directed IRAs

Advantages of 401Ks

Among the many investment plans available in the market, self directed 401Ks have gained a high demand. Popularly known as a Solo 401K, this plan helps you use your retirement funds in any type of investment without the consent of the custodian.

There are many advantages of getting a self directed 401K. Some of them are as follows:

  • Tax free loan facility: Compared to the traditional 401Ks, the solo ones allow the investor to borrow from the 401K account without the application of any taxes. This money can be used for making payments against credit card bills, mortgages, medical and other expenses. The amount is decided by the financial institution that you hold the 401(k) in. Apart from this, you can easily pay this money off in different installments over a certain period of time.
  • Proper diversification: One of the biggest issues faced by people involved in financial investments is the fluctuations in the market. To avoid the shifts in different currencies, you can easily invest in other opportunities like real estate, commodities, gold, precious metals, and raw land. The investment list is limitless when it comes to Solo 401(k)s. The gains and profits that you get from these investments will flow back to your 401K without the deduction of taxes.
  • Easy to administer: Solo 401Ks are known for their easy handling. You will not be required to file any regular or annual declaration, until and unless your asset value reaches a certain level. In case it does, you will only need to file a short information return to the IRS to ensure they are aware of your investments.

Advantages of IRAs

Self directed IRAs are known in the market for their ability to diversify your investment portfolio as you are able to invest in different investment options like real estate, gold, private stock, and many others.

Some of the advantages of investing in Self Directed IRAs are as follows:

  • Checkbook control: One of the biggest advantages of Self Directed IRAs is the checkbook control. Approved by the IRS, this actually enables the IRA owner to invest in any type of investment he wants without any restriction. Apart from this, you also need not pay any custodian fees for making the investment as the consent of the custodian is not required for these investments. This gives the IRA owner control over all the investments being done.
  • Speed of transaction: As there is no consent required from the custodian, the transactions concerning these IRA investments are pretty fast. When you find the right investment opportunity, all you need to do is write a check from your IRA account. You can also do a wire transfer to make the investment. This is much easier, compared to the traditional IRAs, where you need to wait for the custodian to respond and give approval for the investment. The lapse in time, sometimes makes you lose a golden opportunity in investment.

When you are planning for your retirement, you should be looking at different types of plans that will help you gain profits, along with being completely headache free to operate. Self directed IRAs and Solo 401Ks are the best options available in the market for investment diversification.

This article by Rick Pendykoski first appeared on Rick Pendykoski and was distributed by the Personal Finance Syndication Network.

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