A Self-Directed IRA Administration Firm vs. Traditional Brokers

The traditional path to retirement isn’t much of a path at all. According to Yahoo! Finance, after all, the median savings of a Generation Xer is only $40,000—while they might need “$1.1 million to retire comfortably.” Clearly something isn’t working right. The traditional path to wealth, which is saving a lot of money from a stable job over many years, doesn’t always cut it for everybody. Problems with inflation and the economy can only make it worse. To find an edge, some people turn off the beaten path and toward Self-Directed IRA administration firms.

But what are these firms, and how do they differ from traditional brokers? Since we’re one, we thought we’d tell you all about what makes a Self-Directed IRA custodian like American IRA different than the traditional brokerage model of retirement.

The Traditional Broker vs. the Self-Directed IRA Administration Firm: A Definition

Here’s what you may not know. When you have an IRA, you already have a custodian—you just don’t know it because it’s so easy to overlook. Traditional brokerage firms serve as custodians for your account. But it’s easy to overlook this fact because traditional brokerages also offer a limited set of investment options for retirement. Stocks, bonds, funds of stocks and bonds. That’s not always a recipe for a well-diversified portfolio if you want a wider range of potential investments.

A self-Directed IRA administration firm, on the other hand, won’t limit your options so thinly. Retirement accounts can legally hold assets like real estate, precious metals, and private companies inside them, giving the investment holder plenty of leeway for managing them through the IRA if it’s all done through the proper channels. For an investor with a lot of real estate experience, for example, the idea that they can use the tax benefits of a retirement account while still investing in real estate can be a game-changer.

A Self-Directed IRA administration firm is the entity that serves as custodian of this account. They don’t offer investment advice, but rather handle administration of the account. You, the account holder, can issue simple buy and sell orders for the investments you want.

What are the Advantages of Using a Self-Directed IRA Administration Firm?

We’ll be clear: traditional brokers do work. Working through a traditional broker can still mean putting aside a lot of money for high-quality investments. But if you want to spread your wings a little, you may prefer the benefits of a Self-Directed IRA administration firm. Let’s explore why:

  • Diversification. With a Self-Directed IRA, you can hold a broader array of assets, including precious metals, real estate, and private equity, which aren’t typically available through traditional brokers. This diversification can protect your portfolio from market volatility.
  • Control. Self-Directed IRAs provide you with direct control over your investment choices. You can leverage your expertise in specific areas, such as real estate or private lending, to potentially enhance your returns.
  • Tax Advantages. This is an IRA, after all! Investing in a diverse range of assets within a Self-Directed IRA allows you to enjoy the same tax benefits as traditional IRAs, including tax-deferred or tax-free growth, depending on the type of account.
  • Customization. Let’s put it all together. Self-Directed IRAs enable you to create a retirement portfolio tailored to your individual financial goals and risk tolerance, rather than being limited to the standard offerings of a traditional brokerage firm.

For more information about how to incorporate precious metals and other alternative investments into your Self-Directed IRA, call 866-7500-IRA. Our experts can help you navigate the complexities and make informed decisions that best suit your retirement planning needs.

Rate this post