Did you know that you can invest in real estate on a tax-deferred basis using a retirement account? You probably didn’t because you have never heard of anything like this before. The truth is that with a self-directed IRA, you can invest in any business you want. Some of the other investment options for the self-directed IRA account holder includes LLC, stocks, hedge funds and mutual funds. Custodians and brokerage firms stand to gain more from the traditional retirement accounts than from the self-directed IRA. This is why the correct information about this particular retirement account is not that widespread.
The self-directed IRA is not legal and permitted by the Internal Revenue Service (IRS), but people are actually encouraged by the government body to use this account instead of the other more traditional ones.
Self-directed IRA accounts are managed by custodians, who can either work alone or represent certain financial institutions. Before signing up with a custodian to start a self-directed IRA, you would want to make sure whether or not the IRA is “truly” self-directed. With the truly self-directed IRA, you would expect to be able to invest in real estate and also have control of your own money by keeping a checkbook linked to your account. This way, you will have to neither contact your custodian every time you want to transfer money, nor pay transaction fees.
The big time investment firms want you to think that the 401k along with a few of its types is the only option you have as far as retirement planning is concerned. They want you to stick to the stocks, bonds and mutual funds and just earn the think margins of profits so you will have just enough to feed yourself by the time you retire. With a self-directed IRA you can live a luxurious post-retirement life if you play your cards right and use your experience to make the correct investment decisions.
If you hire the services of a qualified custodian, the whole process of opening up a self-directed IRA account is as smooth as silk and if you have all your papers in order, it shouldn’t take too long a time either. If you are a rookie investor just starting out in the business of retirement plans then you will most probably have a hard time trying to set up an account for yourself. Also, before choosing a certain broker to open an account with, you would want to make sure that the person is accredited and qualified for the job by calling the relevant authorities of your state.
You can think of the self-directed IRA as the holy grail of retirement accounts as there is a wide array of options available to you and the margin for making a mistake is quite small. If you can invest in whatever business you like (apart from two or three restrictions) on a tax-free basis, there really isn’t too much more that you can ask for.