Financial planning for retirement generally means accumulating as large of a nest egg as possible, and there are numerous ways to save. But it can be helpful to identify a primary savings vehicle to serve as the foundation of your retirement strategy, and let all of your other retirement decisions flow from there. A self-directed IRA with a custodian such as Quest Trust Company is a great candidate to become just such a foundation.
- A Wider Range of Investment Choices. Perhaps the biggest advantage that a self-directed IRA has over other retirement accounts is that you are permitted to take investment positions in the broadest possible range of investment choices. For example, when compared to the typical employer-sponsored 401(k), a self-directed IRA held at a custodian such as Quest Trust Company provides significantly more flexibility.
Having a self-directed IRA allows you to invest your retirement funds directly in real estate, private equity, private mortgages and loans, and even precious metals.This flexibility not only allows you to invest in exactly those assets you wish, having a wider range of choices means that you can tailor your holdings to the risk/reward profile that best suits your needs and investing personality. This makes the self-directed IRA an excellent choice for the foundation of your retirement plan.
- Additional Investment Opportunities. Making the maximum contributions to your self-directed IRA each year does not preclude you from using other retirement savings accounts such as an employer-sponsored 401(k). Depending on your tax filing status (single versus married) and your income level, as well as the type of your self-directed IRA (Roth versus traditional), you may even be able to deduct these contributions from your current year tax return.
- Portability and Availability.The individual retirement account is something you’ll always have available to make contributions to, every single year, regardless of whatever other options may be provided by your employer. As long as you have earned income, you can make annual contributions to your account. This makes a self-directed IRA a great choice for building your other retirement planning around.
In contrast, in order to have access to a 401(k) plan, your employer must choose to make it available. Employers can also change the investment options or terms of these plans over time, and if you choose to change jobs or careers and work for a company that doesn’t offer such a plan, then you’ll find your self-directed IRA to be particularly desirable.
- Estate Planning Advantages. There are also some estate planning advantages if you decide to leave your self-directed IRA to your spouse. In short, under some circumstances your surviving spouse can treat the inherited IRA as if it was their own, thereby extending the period of time for which they can leave the assets in the account to continue to grow on a tax-deferred or tax-free basis.
You can make your retirement planning easier by using a self-directed IRA to serve as the foundation for all of your future investing moves.