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Top 3 Benefits of a Self-Directed IRA

Benefits of a Self-Directed IRA

Benefits of a Self-Directed IRA

Regular IRA, Traditional IRA, Roth IRA, Self-Directed IRA, SEP IRA, SIMPLE IRA. There are many different options out there for Individual Retirement Accounts. Some are for small businesses, some offer tax-free withdrawals and others give a nice tax deduction. But, the one that really stands out is the Self-Directed IRA.

Key Points
  • A Self-Directed IRA puts YOU in charge of all investment decisions
  • With Checkbook Control, you can make investments at your leisure
  • Properly diversify your plan by investing across multiple asset classes

You might ask, aren’t all IRAs Self-Directed? In a sense, they are, since you get to choose your investments. But try investing in real estate, precious metals or hard money loans with an IRA from your local bank. They’ll say no once they finish laughing at you!

Here, we’ll explain what a Self-Directed IRA really is and how it can supercharge your retirement savings. It’s a strategy savvy investors utilize, but regular folks don’t know much about. With just a little bit of knowledge and some money to spare, anyone can have a comfortable retirement.

What is a Self-Directed IRA?

A Self-Directed IRA is a regular IRA that has a world of investment opportunities. No longer are you limited to what your local bank or the popular online sites offer you. You’re not stuck with traditional investments, such as stocks, bonds and mutual funds. Typical financial institutions make money off the investments they push on you, along with fees. They don’t make money if you invest in nontraditional assets. Therefore, they don’t off them to you.

Moreover, most of the popular institutions say they offer self-directed IRAs. Be sure to read the fine print though! They also limit your investment opportunities. Further, you usually need to get permission to make an investment. Not exactly self-directed is it? Real self-direction doesn’t limit it your investment choices, nor does it require permission. After all, it’s your money and you should invest it in whatever YOU see fit.

Now it’s time to set up your Self-Directed IRA. First you need a passive custodian, like IRA Financial, that allows for alternative investments. The custodian will fill out all necessary paperwork and set up a bank account. Now, you must fund the account. Generally, your SDIRA is funded from an already-established retirement plan. You would roll over, or transfer, funds to the new account. An LLC will be set up and funded with the IRA funds. Now, utilizing checkbook control, you, as manager of the LLC, can make any investment you want.

Related: What is a Self-Directed IRA Custodian?

    Benefits of a Self-Directed IRA


    Something that can’t be stressed enough is diversifying your portfolio, especially your retirement assets. You don’t want all your eggs in one basket, so to speak. By investing with a regular IRA, you’re limited to low-return bonds and stocks. If the market collapses, where will that leave you? Not sitting on a beach at 65 drinking a piƱa colada!

    A Self-Directed IRA will allow you to broaden your investment reach. There are basically three things you cannot invest in with an IRA: collectibles, life insurance and one made with a disqualified person. Other than that, you are only limited your imagination. However, the most popular assets in a Self-Directed IRA include real-estate, cryptocurrency, foreign currencies, and precious metals.

    Related: Why Hard Assets in Your IRA is Important

    Checkbook Control

    As mentioned briefly before, you have checkbook control when using a Self-Directed IRA LLC. You have complete control of the funds in your IRA. This mean, you can make an investment whenever you want by simply writing a check. Of course, in today’s age, you can also use a debit card or a wire transfer. No longer do you need to wait to get permission from your custodian. Also, you can do whatever you want 24/7. No nights and weekends off for your IRA!

    Read More: Self-Directed IRAs & Real Estate Renovations

    Tax Advantages

    All retirement plans offer tax advantages, but it’s an important benefit of the Self-Directed IRA. Traditional IRAs offer an up-front tax break. Most contributions are tax-deductible, meaning you don’t pay taxes until you withdraw money. This lessens your tax bill every year you make a contribution. On the other hand, a Self-Directed Roth IRA does not have the upfront tax deduction. Roths are funded with after-tax money. However, all qualified distributions are tax-free! This means you will never pay taxes on your withdrawals, assuming the plan has been open for at least five years and you are age 59 1/2 or older.

    Related: The $5 Billion Dollar Self-Directed Roth IRA


    As you can see, the benefits of a Self-Directed IRA are immeasurable compared to other IRAs. The freedom of investing in what you want, when you want, will lead to retirement success. Whether you want to invest in real estate, peer-to-peer lending, or cryptocurrencies, the opportunities await.

    To learn more about all the benefits of a Self-Directed IRA, please contact one of our IRA experts @ 800.472.1043!

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