If you’ve ever looked into using a Self-Directed IRA for retirement, you might understand the appeal. They have the benefits of enabling the retirement investor to place a wider range of investments within a retirement portfolio. This can include everything from gold and precious metals to real estate—all with the tax benefits of a retirement account. But then you hear about these things known as Self-Directed IRA custodians, or Self-Directed IRA Companies. What do they do, exactly?
Given our role as one of those Self-Directed IRA Companies, we thought it best if we attempt to give a comprehensive answer to this question.
Self-Directed IRA Companies: Definitions and Roles
First, a definition. Self-Directed IRA Companies, also known as Self-Directed IRA custodians, serve the administrative role on an account. They don’t handle the investing, or even the recommendations for investing. Instead, as a custodian, they offer clients the ability to carry out the decisions the investor makes. This creates separation between the IRA and the original investor while also ensuring that all of the paperwork goes through the proper channels.
In other words, Self-Directed IRA Companies administer the accounts themselves. This is a key role. After all, a Self-Directed IRA has to remain separate from the investor’s personal belongings and investments, which are completely taxable. An investor cannot, for example, buy a piece of real estate property and then live in that same property. That would create an immediate benefit, and possibly trigger taxes and fees on the account as an early withdrawal.
Instead, a Self-Directed IRA custodian makes it seamless for the investor to maintain separation between personal and retirement assets. This relationship is vital to making a Self-Directed IRA work.
Why Not Use a Traditional Brokerage?
It’s simple: you can’t own property in a traditional brokerage account. Working with a Self-Directed IRA custodian like American IRA offers the distinct advantage of being able to work with a wider range of potential retirement assets. For instance, someone who has a background in real estate would be able to use a Self-Directed IRA to make real estate investments. These investments can stay within the account, growing tax-free in some cases, as the investor maximizes the value for their investment dollar thanks to tax protections made possible through a retirement account.
American IRA also brings a dedicated team of professionals who have experience in this area. We dedicate ourselves to our experience in real estate investments, IRAs, and more to make sure that we administer our clients’ accounts successfully. While we are not a financial advisory, we do know the needs and paperwork that go into creating a Self-Directed IRA account that runs smoothly. And it’s this service that ends up being vital for busy retirement investors.
Why a Self-Directed IRA?
A Self-Directed IRA is like any other type of retirement arrangement, except it works through a custodian to allow the investor to make a wider range of investments. This opens the entire world of retirement investments to the investor. There are some limits, of course. For example, investors can’t make investments into wine or other collectibles that have values that are hard to valuate.
But what investors can do is expand to a wide range of assets if they desire, including real estate, precious metals, tax liens, private companies, and more. Understanding this is essential to how investors enjoy retirement investing with a wider range of freedom than most people seek.