Self-directed individual retirement accounts are growing in popularity for good reason. They offer investors a way to diversify their portfolio, have access to unique investment opportunities and control their own financial destiny. But if you’re not familiar with them, what are the specific reasons you might seek out Self-Directed IRAs? What are the reasons so many retirement investors lean on them to help build a retirement portfolio? Here’s how these accounts work and what they’re best suited for:
Self-Directed IRAs are Great for Diversifying Your Portfolio
Self-directed individual retirement accounts are a great way to diversify your portfolio and provide you with a wide range of investment options. With Self-Directed IRAs, investors can invest in real estate, precious metals, private companies and other types of assets. This provides you with the possibility of investing in a wider range of asset classes, as well, which means that you can use them for a wider range of risk strategies in your retirement account.
Diversification is an important part of investing because it helps reduce risk by spreading out your money across several different asset classes. By investing in different types of assets—including stocks and bonds—you’re less exposed to large losses if any one particular asset class does poorly.
What You Need to Know About Self-Directed IRAs
A custodian manages your Self-Directed IRA account investments according to IRS rules, but you are responsible for adhering to these regulations.
Custodians are responsible for executing trades on the account, but not your decisions. However, you must make sure that all of the investments in your Self-Directed IRA (including real estate) are in line with IRS rules and that you pay taxes on income as it comes in.
Exciting Opportunities Within a Self-Directed IRA
Opening a Self-Directed IRA is an easy way to start investing in some exciting opportunities. A Self-Directed IRA is a type of Individual Retirement Account (IRA) that allows the owner to invest in almost anything he or she wants, provided that these investments meet with the standards of the IRS. A Self-Directed IRA is often used for real estate investing, precious metals investing, private equity investments, and more.
The key to understanding this is that you’ll be the one seeking out the opportunities—you won’t simply be limited to what a brokerage is limiting your investment options to. Instead, you’ll be able to execute trades within the account as long as they meet the rules of the IRS. Your Self-Directed IRA administration firm will help ensure that the paperwork filed is in line with regulations.
Reasons Investors Like to Use Self-Directed IRAs
One of the primary reasons people like Self-Directed IRAs? It can be low-cost. Compared to other investment vehicles such as mutual funds or managed accounts, there aren’t necessarily any dynamic fees associated with owning an account through a custodian firm who manages your assets on your behalf. However, remember that you will have to pay the fees on specific types of actions, such as storing precious metals in an insured approved depository.
You will also have to pay the fees of the Self-Directed IRA administration firm. The good news is that at American IRA, these fees are static and don’t rely on you executing only a few trades per year.
If you’re interested in opening a Self-Directed IRA account, we can help. We have years of experience handling these kinds of investments and can walk you through the process step-by-step. Interested in learning more about how Self-Directed IRAs work? Now’s the time to reach out. Give us a call at American IRA by dialing our number at 866-7500-IRA.