How to Open a Self Directed IRA

Self directed IRAs require the use of a third party that is generally called a custodian or trustee. Often times these custodians or trustees charge you fees to open and maintain an account. It’s up to the investor to determine if these fees are worthwhile. Below is series of steps to get started.

1. Choose a custodian or trustee to manage you account.
2. Select the investments types you would like to make.
3. Investigate you investments before committing any funds.
4. Find a broker if needed to purchase the investment.
5. Initiate the transaction with the custodian or trustee of the account.

The easiest why to manage you account is through a broker that offers the custodial service. Here are a couple for reference. Insert links to 2–3 trust accounts.

Advantages of Self Directed IRAs

Investing in a Self Direct IRA can help bolster you retirement assets. It is a great way to provide flexibility in your investment decisions and can provide you with a great way to invest in the things that you truly have a passion. There are built in tax benefits as long as you adhere to a set of rules and it can be an excellent why to leverage your knowledge and experience to maximize returns. In a nut shell, Self Directed IRAs provide:

1. Diversification of Portfolio — A Self Directed IRA allows investors to diversify their portfolios to include assets which are typically not available in standard IRAs. Retirement may want to spread out their assets and not have all their investments in mutual funds or bonds. This is a perfect why to accomplish this. It is also a great way to add precious metals to your portfolio and hedge against inflation. This is done through a what is commonly called a Gold IRA.
2. More Control Over Your Investments — Self Directed IRAs allow investors to focus their money on things they have more knowledge and experience. This makes Self Directed IRAs an obvious choice for someone looking to leverage investments they are more familiar with.
3. Stability — Self Directed IRAs can also be a great way to help limit the volatility of the stock market. Using the Self Directed IRA to invest in real estate is good example.

Disadvantages of Self Directed IRAs

1. Potential Investment Risk — Even if you do you research and are confident in the investment options you select there can be a large amount of risk. You need to do you due diligence and weigh the risks and rewards when choosing nontraditional types of investments.

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2. Limitations — There are a set of rules and regulations that must be adhered to with your investments. Deviating from these rules can result in serious penalties. For example if you choose to invest in real estate you can not live in or use the property for personal use. In addition, there are other rules that must be followed.

3. Fees — There can be higher fees involved with these types of accounts. It is important that you keep these in mind as you calculate possible gains and losses associated with each type of investment. As you probably know, fees can take a serious bite out of investments, so it will be extremely important to minimize these and account for them.

Is a Self Directed IRA Right for Me

You will have to ask yourself several questions to determine if a Self Directed IRA is right for you. These might include:

• Do you want to diversify you retirement assets and do you feel like your retirement might be at risk having all your investments tied up in mutual funds or bonds.
• Are you willing to put in the time to validate potential investment options? This is a must in order to minimize risk.
• Are there areas of interest or areas you have experience in that would be possible avenues for investing. Jumping into an area that you have no experience in could spell trouble.
• Do you want more independence in how your money is invested?

Conclusion

Ultimately if you answered yes to the above questions then you should seriously consider having a Self Direct IRA as part of you investment portfolio. I have personally found this investment vehicle is fulfilling from multiple perspective. In my case it has been rewarding financially and provided me with added confidence in investing.

Stay tuned to learn more on how I used a Self Directed IRA to more than double my account using real estate investments over the course of 4 years.

Until then, thank you for reading and I hope you found this article informative and possibly even inspirational.

To your success!

Dave