Self directed retirement accounts
Self directed retirement accounts can give you more freedom in working with your money and give you the opportunity to really decide where to put your retirement funds. This article will talk more about self directed retirement accounts, how to use them.
What is a self directed retirement account and who can use them?
A self directed retirement account is an IRA that allows you to buy or invest in more than just Mutual Funds, stocks, or bonds. The custodian is usually just a holding bank for the retirement money and you have the ability to direct them to buy or invest in any type of asset you want in your retirement account.
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Anyone can use a self directed retirement account as long as you or your spouse has earned income. The same qualifications apply to opening an IRA with a bank as with a self directed IRA. There are several benefits to self directed IRA, especially for business owners.
Why would you use a self directed retirement account and how much do you invest?
If you aren't retired yet but want to look into a self directed IRA then you can open a Roth account. The growth in a self directed Roth IRA is tax free. The biggest reason you would want to use a self directed IRA is so that you can use your own knowledge to help your retirement account grow. Thus the name, self directed; you don't have to rely on others opinions and management skills to make money in your retirement fund. As far as knowing how much you would invest in a self directed retirement account is entirely up to you. Right now the IRA says that you can contribute 4,000.00 per year but that figure can change as dictated by the IRA and congress. Your earned income limits set by the IRS will also determine how much you can contribute to the self directed account.
Is it worth it?
If you're tired of seeing your retirement balances go down then a self directed retirement account might be just for you. Here's why:
- When you have been working for a long time and most of your savings is locked up in a retirement account you can take advantage of a large investment in something unusual. Your IRA is often times your best source of money to make that investment with.
- There may be more profit in a private investment so using your IRA to make an early investment in a promising business can have huge returns.
Although self directed retirement accounts can give you much more freedom to invest your money where you want there are some things to watch out for:
- Self dealing rules prohibit you form owning a business in an IRA if you're an officer of that business.
- The rules get complicated when buying real estate. Don't let your personal funds get mixed in with your IRA.
- There are also unrelated business income rules to know about and understand.
Self directed retirement accounts may be just the thing you are searching for as they give you more investment control and freedom. However you need to be careful where and what you invest in.
