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Self Directed IRAs are a Hot Commodity

by SMD 


There’s a new way to direct an IRA and it doesn’t involve a high paid stock broker. Self directed IRAs are becoming much more popular as hard working people look for new ways to put their money to work. Everything from start up businesses to real estate projects to investment options are being added to self directed IRAs across the nation. People are tired of those average returns on their retirement money and they’re doing something about it.

The advantage of self directed IRAs seem to be limitless. Though stocks and bonds have been the order of the day for investors of the last twenty years, many Americans simply don’t understand them. There’s steady money to be made in stocks, bonds, and mutual funds, but many investors crave something more. That’s where the self directed IRA comes into play. For those folks who are uncomfortable pouring all of their accrued assets into a fancy stock fund, there are entrepreneurial options and real estate related options to pursue on their own.

Folks must be careful when blazing their own IRA trail, though. The IRA has stringent rules on how an IRA must be handled and those rules carry over to the self directed version. Investments made with IRA money, for example, must not lend any personal benefit or use to the person making the investment. If you take out a tenth of your IRA in order to buy a piece of property, it’s not a good idea to spend your weekends there, as the IRS can tax that money and the rest of the money in your IRA account. In short, there are risks that go along with self directing an IRA that have little to do with the investments themselves.

Those risks aren’t stopping people from taking the chance, though. Self directed IRAs are relatively easy to setup, as a bank can help folks do it in a matter of hours. The upkeep of that IRA is on the holder, but he must seek the help of a firm that collects and distributes the assets held by the IRA. Sometimes the costs associated with dealing with those folks can be high, but they’re nothing compared to what you might pay a stock broker for directing your retirement funds.

Most financial analysts recommend that investors only direct between 10%-20% of their own IRA. That ensures that if something goes wrong with the investment, all of one’s life savings aren’t being thrown away. There are other considerations to keep in mind, as well. Real estate and entrepreneurial deals are much riskier than basic stocks and bonds. Because of that, a ton of research is required by someone directing his or her own IRA. If you’re up for that research, then the investment possibilities are endless. Investing your retirement funds with the right people or the right project can lead to a rewarding benefit for both sides. In today’s dynamic business world, that’s just what many Americans are looking for.

Related: With a “self-directed” account, your funds can seek out unconventional investments.

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