Wall Street Journal reported that lawsuits were recently filed against two self-directed IRA administrators. This raises questions of how much control a self directed IRA can really offer to account holders and whether it is the optimal retirement solution. In light of recent events, a self employed 401k account becomes the preferred option for investors, as it is the only plan that gives true control to plan holders.
Benefits of Self Directed IRA Compared to Self Employed 401k
Self-directed IRA accounts are widely advertised as the solution to a self-controlled, flexible retirement option. This can be true, if the account is managed properly. A self-directed IRA allows investors to choose from a wide variety of investment options, many of which are not available to traditional retirement accounts. After stock investment went sour, a lot of investors made the switch to self-directed IRA accounts to be able to invest in real estate, private placements and other assets of their choices.
Self-directed IRA, however, is not the only way to do so. A self employed 401k account can also give that flexibility to its plan holder. Many Solo 401k plan holders have realized this benefit and successfully grown their funds in different investment options.
A Self Employed 401k Account Offers True Control
What many investors did not realize is that, unlike a self-directed IRA, a self employed 401k account gives plan holders true control by eliminating the role of a custodian. Even with a self-directed IRA, the IRS required that the plan is to be administered by a qualified custodian. This leaves room for error when the custodian fails to perform his duties. The law suits, for example, alleged that Equity Trust Co. and Entrust Group Inc., two IRA custodians, have failed their responsibilities. An Equity Trust reported that the account statement she received showed her total asset value intact, while the money had actually been stolen in an investment scam.
With a Solo 401k, or self employed 401k account, such incidents cannot happen, as the account holders can act as the trustees of the funds, and gain direct access to all information. With no custodian, plan holders are truly the decision maker and can ensure the security of their retirement future. This model protects investors’ money from being misused or mismanaged by a third-party.