As of this writing, the United States is in the midst of a surge in COVID-19 cases. It has made it difficult for just about anyone to function as they normally would. But while traditional retirement investors, putting money away in stocks, will have no problem working through a broker, what about Self-Directed IRA investors? Is it possible to continue to invest in an IRA in the era of social distancing and lockdowns? Let us look into how an IRA works to find the answers.
How a Self-Directed IRA Works
Let us start with the fundamentals. How exactly does investing in a Self-Directed IRA work to begin with? For starters, it is important to note that there are plenty of investment options available to an investor who uses an IRA. You will not be limited to one style of investing, which means that you’ll have options when something unpredictable like COVID-19 happens.
With a Self-Directed IRA, you will work through a custodian. In the case of American IRA, we are an IRA administration firm, acting as the “custodian” for these retirement accounts. The most common form of working with a custodian is when the custodian is “passive,” meaning they give no advice about what to invest in. They do not serve a financial advisory role, but rather an administrative role. In that case, investors use the Self-Directed IRA administration firm to handle paperwork and the transacting of the decisions already made by the investor, without input from the administration firm.
Is a Self-Directed IRA Appropriate for Social Distancing?
In many ways, a Self-Directed IRA is ideally built for an era of lockdowns and social distancing. After all, a retirement account is designed to keep a retirement portfolio separate from one’s personal portfolio. That means that there are many reasons a Self-Directed IRA strategy can overlap with good social distancing practices.
For example, consider the example of a real estate investor using a Self-Directed IRA to hold real estate. In such an account, an investor would keep the property separate. They would use the funds within the account to hire a property management firm to handle specific instances in which it would be required. The investor can stay at home and allow the property to be managed from a distance, just as they always have.
On another level, a Self-Directed IRA can be easy to administer because an IRA holder has only to notify their administration firm to make a specific purchase on their behalf. In this case, social distancing via video conferencing and phone calls will work perfectly. The investor can continue to transact with the IRA without taking on any in-person responsibilities.
In other cases, the assets held within a Self-Directed IRA may be largely hands-off and passive. For instance, handling the storage of precious metals within an IRA is very easy with social distancing. It is expected, after all, that the retirement investor will be largely hands-off; you would not hold your retirement precious metals in a home safe, after all, as this would be a violation of the rules.
Social Distancing and a New Era of Investing
These days, social distancing and lockdowns are part of the nomenclature. As it turns out, a Self-Directed IRA is very adaptable to these practices, making it possible for investors to continue to take the reins of their portfolio the same way they always have. There may be some adjustments here and there, but a Self-Directed IRA can be a powerful way to invest even when there are lockdowns in place.