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Biggest Problem with Self-Directed IRAs is that people don't know they exist

The Biggest Problem With Self-Directed IRAs is That Very Few People Know They Exist

While traditional IRAs have been a well-known retirement strategy for working professionals for decades, self-directed IRAs have only started to gain favor in recent years. Thanks to the abundance of information available online, investors can now easily educate themselves on investment opportunities like never before.

Self-Directed Investing = Alternative Options

Real estate investments are a well-known alternative to more traditional options like stocks and bonds, and are just one example of the investment opportunities available to those with a self-directed IRA. In fact, the abundance of non-traditional investment options is what makes self-directed IRAs so attractive to investors.

Alternative investment options available to self-directed IRA owners include:

  • Physical Gold and Silver
  • Limited Liability Companies
  • C-Corporations
  • Unsecured Promissory Notes
  • Business Startups
  • Raw Land
  • Equipment Leasing
  • Real Estate

The list goes on, and while there are IRS regulations around self-directed investments, a self-directed IRA offers investors the opportunity to use their IRA to further diversify their investment portfolios.

Why are Self-Directed IRAs So Little-Known?

If self-directed investment options are so abundant, why don’t more people know about them? In short, they aren’t widely advertised by employers or financial advisors. Employers typically offer employees two company-sponsored retirement account options – a traditional IRA or a 401(k) account.

A traditional IRA and a 401(k) are, in essence, restricted savings accounts in which an individual and their employer contribute to a retirement fund managed by a financial institution. The portfolio of these accounts usually consists of stocks and bonds. Contributions are (most often) made with pre-tax dollars, offering both employers and employees a tax benefit.

Individuals wishing to invest on their own using their IRA must have access to the IRA. Because the vast majority of an individual’s retirement savings is most often tied to an employer account, self-directed investing simply isn’t an option.

It’s for this reason we here at iPlanGroup write a good deal of content aimed at those transitioning employment. When an individual separates from a company, it’s one of the few times they’ll have direct access to their retirement money. Most choose to roll these savings into a new (traditional) retirement account or IRA. Few realize they’re able to roll those funds into a self-directed IRA. There’s no penalty and their retirement money becomes theirs to invest as they see fit.

The Advantages of Self-Directed Investments

While it’s true that utilizing a self-directed IRA to fund your retirement does require more work than simply investing in a traditional IRA, the work comes with some great benefits.

Investment Tax Advantages

One of the most popular reasons investors choose a self-directed IRA is the ability to make tax-free and tax-deferred investments, which is possible within certain self-directed IRAs.

Increased Portfolio Diversification

If you already have a healthy portfolio of stocks and bonds, adding a variety of alternative investment asset classes could provide substantial growth opportunity and mitigate the effects of an economic downturn.

Full Control

The greatest advantage of self-directed investing is your ability to take full control of your financial destiny. While staying within the IRS guidelines, you’re able to buy and sell non-traditional investment assets you wouldn’t be able to otherwise.

Learn More About Self-Directed IRAs

If you want to find out if a self-directed IRA could work for you, schedule your FREE 30-minute strategy session with an iPlanGroup expert below.