A Self-Directed IRA Custodian is a financial firm in charge of holding your retirement investments for safekeeping, administering the account in such a way that it adheres to IRS and government regulations. In other words, think of a Self-Directed IRA Custodian as a sort of business associate who helps you maintain the integrity of your account. The Self-Directed IRA Custodian is there to handle paperwork, administration, and other issues surrounding retirement investing, sure. But they’re also there to be a trustworthy ally that helps take a lot of the work off of your plate.
That’s a quick definition of the Self-Directed IRA Custodian. But to better understand it, we’ll have to look a little deeper into this relationship. We’ll also address why it’s so important to have one in the first place.
Why Self-Directed IRAs?
Self-Directed IRAs are retirement accounts that you take under your control so you can choose from the full range of retirement investments available to you. Many people are familiar with how retirement accounts work: they feature tax benefits and protections as long as you keep the assets within the account. However, this isn’t the end of the story. A Self-Directed IRA makes it possible for investors to diversify a portfolio beyond the ordinary selection of stocks and funds. A Self-Directed IRA means that investors can choose from a wide range of asset classes, including:
- Real estate
- Precious metals
- Private LLCs and private company stock
These are just four examples of asset classes, however. The truth is, there are few limits to what you can invest in with a Self-Directed IRA, and those limits that do exist are reasonable. That means that if you work with a Self-Directed IRA Custodian who helps you administer a Self-Directed account, you then have access to a broader definition of “retirement assets” than many investors are familiar with.
Why a Self-Directed IRA Custodian?
A Self-Directed IRA Custodian is there to administer the account because you have to keep a retirement account separate from your personal investments. Retirement assets, after all, only earn their tax-exempt status if they truly are retirement assets and not investments that you plan on taking a personal benefit from. To that end, you’ll keep the Self-Directed IRA with a custodian, who administers the account on your behalf.
If it sounds like losing control, remember that a custodian does not have the power to make individual investment decisions that you don’t authorize. Instead, they’ll simply carry out the investments and purchases you want to make, handling the paperwork and administration so that you stay within the rules of the IRS and government regulations. In other words, think of the custodian as a buffer; you’re more independent with a Self-Directed IRA, so a custodian is there to make sure that you do everything the right way. This gives you peace of mind while you invest, ensuring that you have everything you need to save for retirement with confidence in the future.
A Self-Directed IRA Custodian is not a financial adviser, nor are they a tax adviser. They will not give you specific investment advice; rather, they will carry out the investment decisions you make. This puts you in the driver’s seat of your own retirement plan. This can be a major boost for many investors who prefer to make more of their own investment decisions.