The main benefit of a self-directed IRA is investment freedom. A self-directed individual retirement account (SDIRA) gives you the flexibility and choice of exactly how to invest your retirement dollars. You can expand and diversify your investment opportunities beyond the stock market into a variety of assets, like real estate or private equity. By diversifying your investments, you increase the chance of protecting and enhancing your retirement.
A SDIRA works like any other IRA— except you have all control over these investments. Once your account has been established at IRAR and you have enough funds to make an investment, then you tell IRAR what to invest in. IRAR then makes the purchase on behalf of your IRA— but you make the decisions on when and how. Once your asset starts producing income, that income goes in to the IRA. Any expenses come out of the IRA. You are in total control over the buying and selling in your IRA.
You need to complete a new account application and let us know how you will fund the account. If you have an existing IRA or old 401(k), you can move it to a company like IRAR. This is the best way to fund your account. If you've never set up an IRA, you can start saving now with regularly scheduled contributions.
Once you have established an IRA, you can contribute up to the maximum for that year, based on your account type. It's important to note that maximum annual contributions apply to all IRAs combined— so if you've already hit your contribution limit, you've hit it across all your accounts.
For example, if you have three IRAs at three different institutions, your total annual contribution limit is still the same, no matter which account(s) you contribute to. However, the income produced by assets held in the IRA don't have a limit or impact your contributions, since all income goes directly to the IRA.
Almost anyone can establish a self-directed IRA. If you or your spouse (if filing jointly) have earned income for the year and are under age 70 ½, you can open an contribute to an account.
A self-directed IRA can be a great idea if you have expertise or knowledge of a certain asset or market. Like, if you're a real estate investor and already know the ins-and-outs investing in real estate, then you'll probably benefit from the freedom to invest that SDIRAs provide. If you already hold an investment that's producing great returns outside of your IRA, why not invest in the same asset with your IRA? You have options.
To set up a self-directed IRA, you need to research custodians. Once you've found the right provider for you, you'll open an account with them. You'll need to complete their paperwork and provide some form of government issued ID, like a driver's license or passport.
Yes. In order to have a self-directed IRA, you need a custodian. The IRS states that your retirement account must have a third party oversee your IRA, for protection and oversight. Custodians are regulated, audited, and held to specific guidelines.
A self-directed IRA custodian is an entity or company that provides custody and administration of self directed retirement plans. These companies are regulated by state and federal law and must comply with requirements set by the law. In order to become a custodian the company must meet strict qualifications.
Everyone has different requirements when choosing a self-directed IRA custodian.
Some common things to look for when conducting due diligence:
Fees. Not all custodians charge the same. Read the fine print in fee disclosures to make sure you know what you're agreeing to pay for your IRA.
Industry Knowledge. Not all custodians have knowledgeable teams. Make sure they are Certified IRA Services Professionals (CISPs).
Servicing Times. You can loose or miss out on a deal if your custodian has slow servicing times. Pay attention to their communication style when conducting due diligence.