What additional benefit is there to using self directed accounts versus plain investment accounts for your retirement money, including your Individual K plan?
The answer is simple: You get to invest in what you like, and you get to grow your retirement tax free!
Let’s look at how much additional money you get to keep when your money is in a self directed Roth account. And, yes, you CAN set up your Individual K plan as a Roth.
Let’s say you start with $50,000 in your Individual K plan this year. You make NO further contributions for the next 25 years. Nothing, zip, zero, zilch. You do, however, choose to invest that money in real estate or other businesses (really, anything you like). You average 10% returns for the next 25 years.
Without additional contributions, that $50,000 will grow to $342,424. If you had made these investments outside of your self directed retirement account, you would have paid $214,594 in taxes in the 25% tax bracket over those 25 years.
Instead, you get to KEEP IT ALL. That’s right, you just kept $214,594 in your pocket, by utilizing your Individual K plan. You made the investments you wanted to make, and you grew your money tax free. Well done!