1. More Investment Choices

A self-directed rollover IRA provides a wider range of investment options compared to a traditional 401(k). You can invest in stocks, bonds, mutual funds, real estate, and even certain types of precious metals. This flexibility can help you build a more diversified portfolio that matches your financial goals and risk tolerance, whether you're nearing retirement or just starting a new job.

2. Greater Control and Flexibility

With a self-directed IRA, you have more control over your investment choices. This type of account allows you to make investment decisions based on your research and preferences, rather than being limited to the options offered by your 401(k) plan. If you prefer a hands-on approach to managing your retirement savings, or if you're looking to actively manage your investments as you change jobs or retire, a self-directed IRA may be a great fit.

3. Potential for Lower Fees

401(k) plans often come with administrative and management fees that can eat into your investment returns over time. By rolling your 401(k) into a self-directed IRA, you may be able to reduce these fees, depending on the account custodian you choose. It’s essential to compare the fee structures of different custodians to find the best fit for your needs. Lower fees can mean more savings for you as you transition into a new job or retirement.

4. Roth Conversion Possibilities

If you’re interested in converting some of your retirement funds to a Roth IRA, a rollover IRA offers a straightforward path. Converting to a Roth IRA can provide tax-free growth and tax-free withdrawals in retirement. However, you will need to pay taxes on the converted amount at the time of conversion. This strategy can be particularly advantageous if you expect to be in a higher tax bracket in the future, making it ideal for both career-changers and those entering retirement.

5. Estate Planning Benefits

Self-directed IRAs can offer more flexible estate planning options. Beneficiaries of IRAs may have more advantageous distribution options compared to those of 401(k) plans. This can benefit your heirs by helping them manage tax liabilities and maintain the tax-advantaged status of the inherited assets, ensuring your legacy is well-preserved whether you’re in the middle of your career or planning for retirement.

Important Considerations

Before making any decisions, it's important to consult with a financial advisor to ensure that a self-directed rollover IRA aligns with your overall financial strategy. Be aware of potential risks, and understand that self-directed IRAs require a greater level of involvement and due diligence compared to traditional retirement accounts.

If you have any questions or need assistance with the rollover process, we're here to help. Contact The Financial Pharmacist, Inc. today!