You have probably been hearing a lot of talk about Self-Directed IRAs lately. That is because retirement savers are becoming retirement investors, and they are starting to take advantage of these accounts to diversify their portfolios with a whole new world of alternative investments.
Up until the last few years, most retirement funds went into Traditional IRAs that were limited to ordinary investments such as stocks, bonds, mutual funds, and exchange-traded funds (ETFs). Some of the most conservative savers were still opting for the “safety” of certificates of deposit (CDs) and annuities.
But attitudes are changing as the so-called average investor begins to understand that safety does not come from money market accounts and CDs that pay interest rates far below the modest rate of inflation. Instead, it comes from a diversified portfolio of investments that provides growth for an IRA without subjecting it to the roller-coaster ride that is often inherent when there is a limited range of investments.
Self-Directed IRAs give you an opportunity for true diversification and growth potential
With a Self-Directed IRA, you can break free of the constraints of a Traditional IRA. Here are some of the ways you can diversify:
- Real estate
- Private stock
- Private lending notes
- Precious metals
- Tax liens
- Joint ventures and partnerships
- Single-member limited liability company (LLC)
A Self-Directed IRA allows you the same tax benefits of a Traditional IRA while providing you with an opportunity for higher growth potential than you would have with standard investments like stocks and funds. And Self-Directed IRAs are the only retirement-planning vehicles that permit individual investors to pursue these alternative investments as a creative way to save for the future.
You can still choose between Traditional and Roth IRAs
Self-Directed IRAs give you the same tax advantages as regular IRAs, but those benefits will depend on the type of account you use. With a Self-Directed Traditional IRA, for instance, you get an immediate tax break and defer paying taxes on your contributions and earnings until you take distributions during retirement. And with a Self-Directed Roth IRA, you get no up-front tax benefit, but your profits will grow tax-free.
You have more control with a Self-Directed IRA
As the name implies, a Self-Directed IRA gives you more control. Say you have always wanted to invest in precious metals like gold, silver, and platinum, or perhaps the thought of owning a commercial property has always intrigued you. With your Self-Directed IRA, you decide which metals you want to hold or which real-estate investment is right for you.
Of course, you will be required to follow specific rules, especially if you decide to purchase real estate, but the rewards can far outweigh the effort it takes to familiarize yourself (or to seek professional help) with the tax rules associated with the investments. In any event, you will find a sense of control in these alternative investments that you would not be able to replicate in a large mutual fund.
Getting started is simple
First and foremost, you will want to work with an experienced administrator–and that is where we come in. We are American IRA, and everything we do revolves around Self-Directed IRAs. If you would like to open a new account or have questions about opening a new account, please contact our office 1-866-7500-IRA(472), or firstname.lastname@example.org.
Once your account is open, you can add funds to it by transferring money from an existing IRA, initiating a rollover from an employer’s plan (such as a 401(K)), or contributing cash for the 2018 tax year. Keep in mind that annual contributions are limited to $5,500 if you are under 50 years of age or $6,500 for those 50 and over. You must also have earned income of at least the amount you put into your IRA.
After you have funded the account, you may start investing right away. American IRA has simplified our process so that you can quickly and easily take care of your Self-Directed IRA transactions.