Green 401k and IRA street sign, pointing in two different directions

Self-Directed IRA vs. 401(k): What’s the Difference?

“I already have a 401(k). Why would I want a Self-Directed IRA?”

Sound familiar? You may feel like you're doing great if you're already contributing to a retirement account, especially given that half of all Americans have nothing at all put away for retirement, per CNBC.

But, is one retirement account enough? Can one account offer your savings the protection it needs to weather almost any economic storm? The truth is, you can contribute to multiple retirement accounts and the two can work in parallel to secure your retirement dreams.

Make sure you grasp the key differences between two popular types of accounts, the Self-Directed IRA and 401(k), to ensure you're building your best financial future. Let's take a look at the basics and then dive into some key differences regarding eligibility, fees, and asset opportunities.

What's a Self-Directed IRA?

IRA stands for “individual retirement account.” There are a handful of different types of IRAs, but in general, an IRA is like a basket that holds stocks, bonds, mutual funds, and the like, until you're ready for retirement.

A Self-Directed IRA, as we'll compare here, is like a much bigger basket with fewer limitations and great flexibility. It can hold non-paper based assets, like real estate, livestock, franchise interests, and physical gold and silver, in addition to stocks, bonds, and mutual funds. Whatever you’re interested in, there’s a chance you can tie it into a Self-Directed IRA. Being “self-directed” means you're in control of the asset mix, not an employer or anonymous portfolio manager.

What's a 401(k)?

A 401(k), on the other hand, is a type of employer-sponsored retirement plan. It's a way for employees to save for retirement by having a percentage of their paycheck withheld by their employer and deposited into the company's plan.

The funds in the account can be put into a variety of stocks, bonds, mutual funds, and similar conventional assets, but not physical gold and silver, real estate, or other alternative assets. The quality and type of assets available for inclusion can be limited in a 401(k). It all depends on the employer.

Self-Directed IRA vs. 401(k): The Key Differences

Both retirement accounts have the same goal: to increase and protect your retirement savings so that you can enjoy a comfortable, financially sound future. If their goals are the same, does it matter which retirement account you have? Yes. Their goals may be similar, but the two take varying approaches to get you where you want to be.

Eligibility & Ease of Opening

Eligibility for a 401(k) retirement plan is primarily dependent on an employer since this type of account is employer sponsored. There is often a waiting period before an employee can initiate a 401(k) plan too, sometimes six months to a year.

With an IRA, you don't have to wait for an employer or any sort of enrollment period. When you're ready to open up a Self-Directed IRA, you can.

“Since an IRA isn't attached to an employer and can be opened by just about anyone, it's probably a good idea for every worker—with or without access to an employer plan—to contribute to an IRA,” advises Investopedia.

Self-Directed Precious Metals IRAs can be set up in a few simple steps, made even easier with a dedicated IRA Account Executive on your side. Each step is under your control, from establishing your financial goals and funding your account, to choosing a precious metals custodian and securing your precious metals.


When it comes to 401(k) fees, “it's death by a thousand cuts,” says Rick Meigs of 401khelpcenter.com via CNBC. In a market where returns are expected to be lower than in the recent past, fees can quickly gobble up the returns you earn in a 401(k) and reduce the nest egg you aim to accumulate from decades of saving.

“Many 401(k) plan administrators charge record keeping and other fees to manage your account, regardless of whether you are still at the company. These fees can take a significant bite out of your future net worth, especially if you have accounts maintained at several different employers,” writes the Balance.

Self-Directed IRAs are not entirely without fees either, but they may be lower than those associated with a 401(k) and can vary depending on the assets you chose. For example, if you choose to include real estate in your Self-Directed IRA, there's the cost of maintaining the property. With precious metals, there's the cost of storing the physical gold or silver. Because you're in complete control over the assets included, though, you can limit the fees as you see fit, potentially more so than with a 401(k).

Asset Opportunities

This is one of the most important differences between a 401(k) and Self-Directed IRA. An employer can have quite a large say in where your money goes in a 401(k), which already limits you to conventional assets.

These conventional assets are often subject to swings in the economy. In 2008, one of these very swings happened and when trillions of dollars evaporated from 401(k) accounts across America.

“What kind of retirement plan allows millions of people to lose 30 to 50 percent of their life savings just as they near retirement?” asked CBS News a year after the memorable economic downturn.

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Fortunately, the same factors that weaken traditional retirement holdings like they did in 2008 can do the opposite to some Self-Directed IRA assets, like physical gold and silver. In the end, the trick is to diversify your retirement portfolio to avoid being overexposed to assets that typically move up or down at the same time or rate.

Self-Directed IRAs offer you the flexibility to do just that. You can diversify away from the stock market, one market sector, or one asset type. In fact, you have the freedom to choose things you enjoy and use them to fund your retirement. Whether it’s real estate, limited partnerships, oil and gas royalty interest, certain gold and silver coins and bars, even dressage horses—your personal passions and specialized knowledge can be used to protect your retirement.

The Bottom Line? It's Up to You

A 401(k) isn't the only route to a better financial future. When you're in charge of your retirement (and you are) there's no limit to how well you can set yourself up financially.

“The responsibility to fund [y]our own retirement rests squarely on [y]our shoulders. Regardless of whether an employer provides a defined plan or not, we need to ensure we are funding an appropriate retirement plan in some capacity,” advises Jamin Armstead of Dishon Financial.

A Self-Directed IRA, strengthened by the power of precious metals, can help you get there. Now is the time to request U.S. Money Reserve's exclusive Precious Metals IRA Kit. Learn more information about Self-Directed Precious Metals IRAs today and unlock the information you need to secure your retirement!


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