For many individuals who want to plan ahead, a retirement account is one of the best means to save for the future. For most, an individual retirement account (IRA) or 401(k) plan are the primary means of doing so. However, did you know there were other options? At Royal Legal Solutions, we understand your desire to capitalize on a diverse investment portfolio. Below, we talk about the types of 401(k) accounts available to you, as well as the investment options each present.
There are several types of 401(k) accounts you can have. Depending on the type of 401(k) you have, your investment options can be greatly expanded.
For most individuals, a company-sponsored 401(k) account is the kind that comes to mind. These accounts, set up through your employer, come with their own set of guidelines. Typically, a company will partner with a financial service business in order to provide these accounts to their employees. More often than not, these plans are strictly limited to the typical stocks, mutual funds and bonds. Can a business elect to have a more diverse investment portfolio for their employees to choose from? Yes. Yet, this is seldom the case. Most employers, however, do help you save for your retirement faster by matching all or part of your contribution.
If you are self-employed, without employees, you may elect to open your own 401(k) account with a financial institution. These accounts, known as individual 401(k) plans, are also limited in scope. This is because most financial institutions do not offer “self-directed” options to their clients. In fact, your investment options will be limited to those options offered by the company.
As with the individual plan above, a self-directed 401(k) can be established by anyone who is self-employed without employees. In a self-directed 401(k) account, your investment options are almost limitless. In fact, with a self-directed 401(k), you can expand your investments from those traditional options above to include real estate, private placements, precious metals, and more. A self-directed 401(k) can be either traditional or Roth-based, which allows you to use either pre- or post-tax dollars for your contributions.
There are many benefits to opening a self-directed 401(k) account. (Likewise, you can also open a self-directed IRA account too!) To do so, however, you need to find a reputable and specialized firm that offers this. Royal Legal Solutions can help! Our professionals specialize in self-directed retirement accounts. We understand the laws established by the Internal Revenue Service (IRS), as well as any state and federal laws that may affect your account too. If you would like to learn more about self-directed accounts, saving for your future, or IRS regulations, contact us today.
Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.
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