What To Know About Self-DIrected IRAs

Self-directed IRAs are rapidly becoming investors go-to investment to save for retirement. Self-directed IRAs are no different than a normal IRA besides the fact you can invest in alternative assessments outside of the traditional options like stocks, bonds, mutual funds, and CDs. Many people don’t realize the wide array of options for investments that self-directed IRAs can provide. In fact, the only assets that aren’t investment options for these accounts are collectible, alcohol, and life insurance. Short list, right?

IRAs like these are the best way for an individual to invest smartly in what they know while diversifying their assets at the same time. Alternative assets offered by self-directed IRAs range widely from real estate, private business interests, precious metals, LLC’s and many more. With this type of investment vehicle, IRA account holders are entirely responsible for their retirement investments and decisions instead of a hired broker or investor.

While the IRS has a variety of prohibited transactions and excluded investments to be knowledgeable of, there is still a wide variety of investments out there for a well-informed investor. One aspect that is required of this account type which varies from other investments is the federal requirement to have a qualified custodian or trustee to hold and administer the investor’s assets.

Custodians or trustees are only authorized to execute investment transactions with the sole advisement of the investor, as long as it doesn’t violate any federal regulations. Custodians are not allowed to advise on any type of investment.

The investor’s role is to responsibly and diligently research investments before completing a transaction. This is especially important with self-directed IRA owners because of the possibility of prohibited transactions occurring, which incur serious penalties from the IRS.

Like all investments endeavors, it’s recommended that future self-directed IRA holders consult financial professionals as knowledgeable resources, such as attorneys or tax professionals. Having reliable financial professionals to turn to for sound investment advice, especially in regards to potential prohibited transactions, is highly suggest for self-directed IRA holders who direct all their own decisions.

Self-directed IRAs can be a high reward option for people wanting direct control of their retirement savings. But like all investments, time and research should go into deciding if it’s the best investment option for you. With knowledge, professional advice, and smart decisions, managing a self-directed IRA can be as successful and rewarding of an investment option as traditional investments.

If you are interested in learning more about self-directed IRAs and how to start planning for your future, contact us at IRA Innovations today.

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