So, you have made it. Not only have you established a Self-Directed IRA with a reputable administration firm, but you know your plan and what you want to accomplish before retirement. Now comes the long part—the actual investing. From now until retirement, you are going to carry out your own plans for building wealth on a journey that could take years, or even decades. And what many people who aren’t in your situation quite yet will wonder is simple: what is lifelike when you have a Self-Directed IRA? Everyone’s situation is different, but here is what we are able to tell you.
You Make the Decisions
Having a Self-Directed IRA is a simple prospect. You own a retirement account, and you make the decisions as to what types of investments you will hold in them. There are only a limited amount of assets, as established by the IRS, that you can’t hold in these accounts, such as certain types of collectibles, art, and wine. But if you want to own stock, real estate, or even private company stock within a Self-Directed IRA, you can. That means that life will be very different in that regard: you will have the capacity to make your own decisions and make the investments you want to make, provided they are legitimate.
What does this mean? It means that your life as a Self-Directed IRA holder is ultimately up to how you plan to spend it. Do you want to constantly look out for new real estate deals because you have that as a hobby? That might be a good way to go about building wealth through a Self-Directed IRA. Do you want a largely passive, hands-off approach in which you consistently make monthly contributions toward the account? That is easy, too, and will allow you a hands-off lifestyle so you are free to focus on other things.
The point with Self-Directed IRAs is simple: when you control the keys to your own account, you get to call the shots.
You Determine Your Own Involvement Level
One thing is clear: if you want to invest in a Self-Directed IRA, you will have more involvement than you might with an account that has more limited choices. However, you can structure your Self-Directed IRA the way you want. You can create a largely passive approach with real estate or stock investments, for example. Or you can carry out a more active approach in which you decide who you make private loans to. Ultimately, the decision lies with you.
That means that you should have an idea of what you want your life to look like as you save for retirement, even before you establish the Self-Directed IRA. It is possible your plans may change over time. You may adapt them to suit your needs. But overall, you will have plenty of freedom to determine just how much time your IRA takes to manage and control.
Know Your Contribution Limits
What is lifelike with a Self-Directed IRA? Depending on how aggressive you are, you may be contributing a lot—or a little. This also depends on the contribution limits of your individual accounts. For example:
- For Traditional and Roth IRAs, the contribution limits in 2021 are $6,000, depending on your situation. If you are 50 or older, you could have contribution limits of $7,000.
- Contribution limits for the Solo 401(k) plan, meanwhile, can be widely variant. You can check the IRS website for more details.
Other accounts, such as the SEP-IRA, will require specific knowledge of your situation, so it is important that you know your contribution limits in advance before you get started with monthly contributions.
Working with a Self-Directed IRA Administration Firm
Here is what many people fear about the IRA: that once they establish it, their life is going to be a non-stop river of paperwork. But that’s why investors will seek out a Self-Directed IRA administration firm. They help take the load off by handling administrative functions. American IRA, for example, will not be making investment recommendations, but will instead carry out the legitimate decisions you make for yourself. The administration of your account is one of the most important decisions you will make in retirement, and it is one that you’ll want to decide carefully.