In today’s video, Adam Bergman, Esq. and Isaac Rodriguez, a client at IRA Financial, discuss the differences between a self-directed IRA and a Solo 401(k), and why someone might choose one over the other.
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IRA Financial Group was founded by Adam Bergman, a former tax and ERISA attorney who worked at some of the largest law firms. During his years of practice, he noticed that many of his clients were not even aware that they can use an IRA or 401(k) plan to make alternative asset investments, such as real estate. He created IRA Financial to help educate retirement account holders about the benefits of self-directed retirement plan solutions.

IRA Financial is a retirement account facilitator, document filing, and do-it yourself document service, not a law firm. IRA Financial Group does not provide legal services. No attorney-client relationship exists between Client and IRA Financial, its management, salespersons or IRA Financial’s in-house legal counsel. IRA Financial Group provides IRA retirement facilitation service and CANNOT provide Client with legal, investment, or financial advice. Prior to making any investment decisions, please consult with the appropriate legal, tax, and investment professionals for advice.

IRA Financial is not engaged in rendering legal, accounting or other professional services. If legal advice or other professional assistance is required, the services of a competent professional person should be sought. (From a Declaration of Principles jointly adopted by a Committee of the American Bar Association & a Committee of Publishers and Associations.). The scope of Professional Services does not include the costs of any custodian related services.

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When it comes to retirement savings, many individuals are familiar with traditional IRAs or 401(k)s offered by employers. However, there are also self-directed IRAs and Solo 401(k)s that allow for more control and flexibility over investment options. Both of these accounts are popular choices for those looking to diversify their retirement portfolio and take a more hands-on approach to investing.

A self-directed IRA, as the name suggests, allows individuals to have more control over their investment choices. Unlike traditional IRAs, which are typically limited to stocks, bonds, and mutual funds, self-directed IRAs can include a wider range of investments such as real estate, precious metals, private equity, and more. This flexibility can be appealing to those looking to invest in alternative assets and potentially earn higher returns.

On the other hand, a Solo 401(k) is a retirement account designed for self-employed individuals or small business owners without full-time employees. Similar to a traditional 401(k), a Solo 401(k) allows for contributions from both the employer and employee, but with higher contribution limits. This type of account also offers the option for a Roth component, allowing for tax-free withdrawals in retirement.

One of the main differences between a self-directed IRA and a Solo 401(k) is the contribution limits. Solo 401(k)s have higher contribution limits compared to self-directed IRAs, allowing for potentially greater tax savings and retirement savings. Additionally, Solo 401(k)s can also allow for loans, providing flexibility in accessing funds in times of need.

Another important consideration when choosing between a self-directed IRA and a Solo 401(k) is the administrative burden. Self-directed IRAs typically require more due diligence on the part of the account holder, as they are responsible for choosing and managing their investments. On the other hand, Solo 401(k)s may require more administrative tasks, such as filing annual tax returns and ensuring compliance with IRS regulations.

Ultimately, the decision between a self-directed IRA and a Solo 401(k) will depend on individual preferences, investment goals, and financial situation. Both accounts offer unique advantages and disadvantages, so it is important to carefully consider your options and consult with a financial advisor to determine the best retirement savings strategy for your specific needs. Whichever option you choose, it is important to start saving for retirement early and consistently to secure a comfortable future.