A Self-Directed IRA is a nontraditional, tax advantaged retirement account that allows an investor who already understands certain markets to take a more active role in choosing how and what to invest in, rather than going the more traditional route of hiring an account custodian to make those decisions on the investor’s behalf. A Self-Directed IRA puts the investor in direct control of making investment decisions. Here the investor conducts his or her own research and chooses where to invest, and leaves just the more administrative duties to the account custodian. If you’re someone who has been already making investment decisions outside of your IRAs, or someone who already holds a solid understanding over market conditions, then a Self-Directed IRA can empower you to build your retirement account much faster than more traditional approaches.
What Can You Invest In with a Self-Directed IRA?
Before deciding that a Self-Directed IRA is what’s right for your retirement plan, you need to understand what exactly you can invest in. Things like residential and commercial properties, land, renovation or new construction, passive rental income, mortgages and other loans, hedge funds, precious metals, Limited partnerships, and commercial paper and notes are just a handful of examples of the things you can invest in with a Self-Directed IRA. The broader selection of allowable investment options can really open up doors for the savvy investor with real market understanding during economic dips and downturns. For example, investing in Real Estate during times like now when market conditions have dropped can really boost one’s retirement earnings quickly if you know what you’re doing, making a Self-Directed IRA a remarkably powerful retirement fund building tool. It’s not uncommon for a person to buy a piece of property and flip it when conditions improve a bit for a tidy profit of around $50,000 – $100,000 and all of that profit remains in their Self-Directed IRA without having to pay taxes on the profit or the interest. That’s a lot more than you could earn waiting for a bunch of bonds to mature as with more traditional IRA accounts!
Is a Self-Directed IRA the Right Choice for Your Retirement?
If you’re someone who already has a strong understand of certain markets, and perhaps has already been investing in these markets as part of your overall approach towards funding your retirement, then perhaps you’ve got what it takes to run a Self-Directed IRA account. After opening your own account that you manage, you’ll be able to do things like own rental property as a retirement investment, to invest in certain commodities such as precious metals, or become an angel investor to another company. You’ll even be able to make personal loans to certain family members or friends, and keep the interest earned in your retirement account without having to pay taxes on it.
So How Do I Open a Self-Directed IRA for Myself?
Even though a Self-Directed IRA lets you start making your own retirement investment decisions, and empowers you to shape your own financial destiny based on market expertise you already have, the account itself will need to be administered by neutral third party professionals, called account custodians or administrators. Your account custodian/administrator will understand all of the ins and outs surrounding the tax codes, regulations, and paperwork requirements, allowing you to safely and securely make your investment decisions, without getting mired down in the tedium of filing paperwork, and will free your mind from worrying about whether the IRS will come knocking on your door at 3 in the morning because you’ve been making improper investments. Your Self-Directed IRA account custodian/administrator will take all of this off of your shoulders and let you focus on the market you’ve grown so knowledgeable of over the years, and make use of that knowledge to invest aggressively yet wisely for your retirement.
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About the Author
Next Generation Trust Services is a professional third-party administrator of Self-Directed IRA accounts serving New Jersey, New York and Connecticut. With over 6 years of continued growth, Next Generation Trust Services provides administrative support and account maintenance to clients interested in opening Self-Directed IRA accounts to add to their retirement portfolios. For more information on self-directing your retirement plan, visit www.nextgenerationtrust.com