Self Direct Your Retirement
Everyone needs to take seriously the importance of planning for retirement. As of 2015, there was $24 trillion held in retirement accounts accounting for only 60% of the US households, only 32% American households hold Individual Retirement Accounts (IRA), only 4% of retirement accounts are invested in alternative investments, and 85%+ of households are unaware of how much control they have over those retirement funds.1
They are familiar with traditional investment options such as mutual funds, ETFs, and stocks but do not know that IRA investment options go beyond these traditional investments. With fluctuations in the stock market over the past decade and the breakdown of consumer confidence in corporate America, there has been an explosion in the demand for alternative investments and greater choice within retirement accounts. A growing number of investors are learning that they can also invest in real estate and other non-traditional assets using their retirement accounts.
Self-Directing your IRA – A Best-Kept Secret
All IRAs are by definition “self directed“. This means that if you currently have an IRA, you can direct the custodian of that IRA to invest in virtually any investment allowed by the Internal Revenue Code (IRC). The IRC allows a wide variety of investment opportunities to individuals with IRA accounts, from traditional stocks and mutual funds to precious metals and real estate.
Self-directing your IRA means directing your IRA custodian, the legal entity that holds your IRA, to invest in a particular asset for you; but for this to work, the custodian must support those investments. Most custodians allow clients to select investments from a list that they provide, but those lists are usually limited. Most IRA custodians do not support the full range of investment opportunities that are available to you as an investor.
Take Control of your Retirement
It is important that investors have control over their retirement investments, giving them the choice of where to invest the funds. Peter Lynch famously said, “Invest in what you know.” We believe that every investor should have this choice. Investing in alternatives with a retirement account can provide many benefits such as diversification, transparency, and control. However, these benefits could be lost by investing in assets which are not familiar to you. For example, a real estate building contractor should naturally focus his interests in the real estate market rather than dressage horses, or a food franchise.
We find that investors who are looking to take control of their self-directed IRA frequently look to real estate as their choice of alternative investment. There are many ways to invest in real estate as an asset class. Some investors choose to invest in real estate directly, while others choose to invest in private mortgages, tax liens, farmland, timberland, fishing rights, and more.
With this great opportunity to invest in assets outside the traditional stock and bond markets, comes an additional responsibility that you to understand how to structure your investments so they are compliant with the IRC. While you might assume that you can just ask the IRA custodian to answer questions about how to structure your investments. This may present a problem for you. Custodians are only allowed to process the transaction and make sure it is compliant with the IRC. They are not allowed to provide investment advice, investment due diligence, or discuss whether the transaction is suitable.
If you are new to using Self-Directed IRAs to invest in alternative investments, what can you do?
Innovative Advisory Group has created many resources on this site to appeal to both the investors who want to do it themselves and the investors who realize they need professional advice. Below is a list of pages and reports on our site that are resources for investors who are looking to learn more about Self-Directed IRAs. If you are interested in speaking with us about using your self-directed IRA to invest in a specific type of investment, feel free to contact us to discuss it in more detail.
How We Can Help You
Innovative Advisory Group has a unique and extensive understanding of the legal and financial considerations involved in Self Directed IRAs. We work with our clients to give them as much help as they need, from setting up a Self Directed IRA, to finding and evaluating IRA custodians who support particular types of investments, and helping clients evaluate one or more investment choices to fit their specific needs and avoid common pitfalls. As long as the IRS rules and regulations are adhered to, the imagination becomes the only limitation to a well-balanced investment portfolio.
If you want to learn more about how we can help you with your self-directed IRA, Contact us.
Frequently Asked Questions (FAQ) about Self-Directed IRAs:
- Self-Directed IRA FAQ
- Self Directed IRA Rules – Tax Codes, Case Law, and Guidelines
- Self Directed IRA Terminology
- Gold IRA Rules – Essential Rules for Investing in Precious Metals with Your Self-Directed IRA or 401k
Innovative Advisory Group Self Directed IRA Related Articles & Resources:
- What is a Self Directed Retirement Account?
- 9 Common Mistakes Investors Make Using a Self-Directed IRA
- The Quick Start Guide to Self-Directed IRAs
- 28 Questions to Ask Your Self Directed IRA Custodian
- The Ultimate List of Self Directed IRA Custodians & Administrators
- The Complete List of Advisors For Self Directed IRA Services
- The Ultimate Insider’s Guide to Self-Directed IRA Custodians and Administrators
- The Real Estate Investor’s Guide: Using a Self-Directed IRA to Buy Real Estate
- 5 Common Prohibited Transactions That Could Tax Your IRA
- The $100 Million Dollar Mitt Romney Self Directed IRA – How you can use these strategies to build one yourself
- Worried About Fraud with Your Self-Directed IRA? SEC Says, Ask a Financial Advisor
- Defined Benefit Plan: The Best Retirement Plan You Never Heard Of
1. Investment Company Institute (http://www.ici.org/pdf/2016_factbook.pdf)