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Roth IRA is one of the well-known and oftentimes considered best IRA for self employed. If you are looking for reliable financial investment and retirement account, it is imperative to know more about this plan. Nowadays, you might find it more challenging to decide what retirement account to choose. There is a big difference as well as similarities for 401k vs IRA. Sense Financial Services LLC, the leading provider of premier retirement plan Solo 401k and Self-Directed IRA offers valuable information about these two topmost investment ventures. For Roth IRA, there are essential benefits from this account that you must learn and understand.

Roth IRA plan is not subject to Required Minimum Distribution Rules

One of the reasons why Roth IRA is considered the best IRA for self employed is that it is not required to comply with RMD rules unlike traditional retirement accounts. The Required Minimum Distribution rules subject the account holder to pay taxes on distributions. This is a requirement which takes effect as soon as the plan holder reaches 70 ½ years old. If you are not subject to RMD, tax-free income is accumulated, allowing the account to boost its accumulated and tax-free income throughout the duration of the owner’s lifetime.

401k or Best IRA for self employed: Which is best - distribution extension for surviving spouse

Roth IRA is not only the best IRA for self employed account holders but also a lucrative and useful investment for the surviving spouse. That’s because the account beneficiary of the retirement plan can still opt to continue the contribution to the plan. Or the beneficiary could opt to combine this Roth IRA to their own retirement plan, basically the same Roth IRA. This means that the surviving spouse could take over and benefit from the account particularly the growth on investment with its tax-free features. On the other hand, traditional retirement plans are not allowed to be combined and merged into the surviving spouse’s IRA. The beneficiary is also not allowed to opt for an additional contribution to the existing account.

Roth IRA account holders do not pay 10% early distribution withdrawal penalty

Account holders who decide to withdraw their account contribution before they reach the age of 59 ½ are not subject to the 10% payment of the early withdrawal penalty. Account holders could basically withdraw their converted or contributed amounts to their Roth IRA retirement account without the hassle of paying taxes or the penalty as long as they comply with the 5-year wait period making it the best IRA for self employed.

“Compound interest is the 8^th wonder of the world… Those who understand it earn it… Those who don’t pay it.” ~ Albert Einstein

Thanks to the efforts put in by financial gurus, a lot of people are aware of the concept of compound interest. For those of you a little dubious about the same, here’s a quick definition:

‘Compound interest is interest calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan. Compound interest can be thought of as “interest on interest,” and will make a deposit or loan grow at a faster rate than simple interest, which is interest calculated only on the principal amount.’ ~ Investopedia

Being a retirement solution provider, we help our clients realize the benefits of compound interest and one of the best ways to do so is to contribute towards a tax-deferred retirement account.

Why invest in a tax-deferred retirement account?

• Compounding of your money: Your money enjoys tax-deferred growth for several decades, accumulating more interest with every passing compounding cycle.
• Qualified deductions: By contributing to a tax-deferred retirement account, you are eligible for qualified tax deductions, hence reducing your tax bills right away.

Couple compound interest with a Roth Solo 401 k & Get Tax-free Distributions*

How about combining the magic of compound interest with a Roth Solo 401 k account?

A Roth Solo 401k account is a retirement plan for self-employed professionals and owner-only businesses, allowing after-tax contributions. Under the plan, the account owner pays taxes upfront and in return, they receive tax-free distributions.

• Annual contributions: $24,000 in 2016 (including catch-up contributions of $6,000 for professionals above 50 years)
• No income restrictions: Unlike a Roth IRA, there are no income restrictions for making eligible contributions to a Roth Solo 401k plan.
• Tax-free withdrawals: If your Roth Solo 401 k account satisfies certain conditions, you can receive tax-free eligible distributions in retirement.

Here is a short Infographic to highlight some of the primary features of a Roth Solo 401k plan:

Real estate investors are often drawn to this market by its earning potentials and security. Many investors have successfully built their wealth upon real estate, one property after another. But what about their retirement funds? Many investors assume that retirement funds can only be invested in stock and mutual funds, and they leave it all to their custodian to manage the portfolio. This, however, is not necessarily true, as now innovative retirement solutions such as Solo 401k Plans can help real estate investors take charge of their future.

Is real estate a wise choice for retirement funds?

Most real estate investors are in for the long haul, not expecting to cash out until years later. This actually makes real estate a perfect fit for retirement planning, which often holds investment for years until account holders make withdrawals. Many investors choose to add properties to their portfolio. With these, they can collect rental payments as a steady return, while waiting for the value to appreciate over the years.

Investors who prefer fast return can also attain that with real estate investments, by engaging in house flipping. In this case, investors would purchase a property, remodel it, and sell for a profit. It involves more risk and more effort from the investor, but can potentially generate much larger returns.

The biggest advantage of adding a property to any investment portfolio is its security. Investors can always recover their initial investment by selling the property itself, so they are less likely to lose everything.

Solo 401k Plans Allow Real Estate Investment

As much as real estate professionals know about the industry, why do they still have nothing but stocks and funds in their retirement accounts? The answer is simple: not a lot of people know that retirement plans can hold other assets.

For some traditional retirement plans, it is true that investment choices are limited. However, there are innovative solutions, such as Solo 401k plans, that allow virtually any legally available investment. Plan participants can invest in real estate, including commercial and residential properties, trust deeds and notes. The plan allows high contribution limit and self-directed option, giving plan participants even more control.

Self-directed Solo 401k plans give full control to plan participants as they can now act as the trustee of their accounts and make all the investment decisions. In order to succeed however, investors need to have a good understanding of the investments they choose.

For real estate investors, obviously, real estate is the best investment choices, as the account holders have the knowledge and experience required. In these cases, adding real estate to a retirement portfolio can potentially secure and grow the portfolio more effectively.