We’re constantly coming up against myths and misconceptions people have about Self-Directed IRAs, or IRAs in general. So it’s time to clear the air and put to rest some of the most common Self-Directed IRA myths we come across.

• Self-Directed IRAs are risky. Well, this one can be true, and in practice, it often is true. But it doesn’t have to be – and it also depends on how the investor defines risk. But the Self-Directed IRA is just a type of account, that comes with a certain type of taxation and a few rules on the kinds of investments you can make within them and who the IRA can transact business with. You are perfectly free to create a Self-Directed IRA that is essentially risk free, for as long as you like. For example, you can create an account with American IRA, LLC, and fund it entirely with FDIC insured CDs, with no market risk whatsoever (though you have some inflation risk, so you can’t avoid risk altogether!

Your Self-Directed IRA is always as safe or as risky as you decide to make it. That’s the whole point: You can decide your own risk exposure. No outside money manager needs to be in a position to do that for you.

So, yes, you can dial the risk level way up, if you like, leveraging volatile investments, buying into venture capital funds or making big, concentrated bets on individual and speculative securities in emerging markets if you like. Or you can have one entirely stuffed with CDs, money market funds and fixed annuities. It’s entirely up to you.

• I don’t need to name a beneficiary. You may not care about it personally. But chances are the people you do care about have a lot riding on that named beneficiary form, and Self-Directed IRAs and 401(k)s are no different. Failure to designate a named beneficiary in writing can have devastating consequences for loved ones. If you fail to name the beneficiary, then you are handing the keys to your life’s savings to probate lawyers, not to your family members and loved ones, who may really need quick access to that money.

You also wind up taking options away from loved ones, and effectively passing more money to the IRS, rather than your loved ones, than is necessary. For example, failing to name a beneficiary could force heirs to liquidate the entire account within five years, rather than spreading the benefit of tax free deferral or tax free growth over their lifetime – a much more tax-efficient solution.

• I don’t need to roll old 401(k) balances to an IRA. Well, maybe you don’t. If your account balance is under about $5,000 or so, your old employer may keep it on the books. But you may run into problems if you need to access the money. 401(k) plans don’t have to honor the same emergency hardship withdrawal provisions that your Self-Directed IRA and conventional IRA accounts enjoy.

Plus, if you do cash out part or all of an existing 401(k), the plan sponsor will withhold 20 percent of the balance and forward that to the IRS against taxes. With an IRA, you control that process, not your former employer and the IRS.

That said, if you have substantial unrealized appreciation in assets within your 401(k) (for example, employer stock), then speak with a tax advisor before blindly doing a rollover.

American IRA, LLC is a third party administration firm specializing in Self-Directed IRAs, 401(k)s, SEPs, SIMPLE IRAs and other tax advantaged accounts. Our offices are in Charlotte and Asheville, North Carolina. But we are happy to work with investors anywhere in the country who are successful, open-minded, entrepreneurially minded, or just plain interested in controlling their own retirement assets rather than delegating that vital function to Wall Street advisors.

For a free consultation or for more information, call us today at 866-7500-IRA(472), or visit us on the Web at www.americanira.com.