Using a Self-Directed IRA means a retirement investor has to take over the financial reins. In other words, they become the masters of their own destiny as it relates to retirement—and that can be a tall order. However, with a few tips and tricks, it’s possible for investors to do so with not only confidence, but with some expectation that they’ll succeed. That leaves us with one question. What are the tips and tricks investors can use to help promote success with Self-Directed IRAs? Let’s take a look at a few.
Tip #1: Choose a Self-Directed IRA Custodian That Charges Flat Fees
This might not sound like a big deal at first. After all, isn’t it all about the services a Self-Directed IRA administration firm provides? Well, yes. But keep in mind that because an IRA administration firm doesn’t offer financial advice, they’re not incentivized to make you more money by giving you smart investment advice. In other words, you should seek out a Self-Directed IRA custodian who provides you with experienced, effective service—at a flat rate.
This flat service fee will help you make sure that you can expand the size of your portfolio while enjoying the same low flat fees for the custodial services you’re receiving from the IRA administration firm. The longer you go, the more money you’ll have in your account (hopefully), which means that the fees will comprise a smaller and smaller piece of your portfolio.
Tip #2: Use a Rule of Thumb to Avoid Prohibited Transactions
A rule of thumb for avoiding prohibited transactions is simple: don’t do business between your IRA and someone who is considered “disqualified”. It’s really that simple. Self-Directed IRA investing means you have to be cautious when working with people you know, because doing so can create an immediate personal benefit that is not meant for retirement accounts. For example, if you rent out an IRA property to a parent or a daughter, the IRS perceives you to be receiving personal benefits from this property. That means that you may owe taxes and penalties for an early withdrawal, as you’re using the assets that are supposed to be in the account in a way that provides benefits outside the account.
Sound confusing? The simplest way to remember it is that you shouldn’t transact between an IRA and someone who is part of your lineal family.
Tip #3: Take Your Time Before Investing
When you have a Self-Directed IRA, you are in charge of your own investments. You can hire a financial adviser, of course, but when you work with a Self-Directed IRA administration firm, you’re the one who’s in charge of the decisions you make. Take your time! Do your research. Before you plunge headlong into an asset or even an asset class, take the time to consider what you want your retirement to look like. The more discipline with which you approach your life as an investor, the more likely you are to see things through.
How do you know when you’re ready for a Self-Directed IRA? It’s a trick question. The truth is, Self-Directed IRAs are far more intuitive than you might imagine. They’re easy to open, easy to fund, and once you have a great Self-Directed IRA custodian in your corner, they’ll be easy to manage as well. All you have to do is reach out to a Self-Directed IRA administration firm who can help make the entire process easier.