In the wake of Hurricane Helene, our physical office began to slowly bring up all operations as of 9AM ET, Monday, October 7. Read Notice

Tips To Know Before Opening a Self-Directed IRA

Tips To Know Before Opening a Self-Directed IRA
Tips To Know Before Opening a Self-Directed IRA

While Self-Directed IRAs have been in the industry for several decades, investors have evolving preferences. On the one hand, experienced investors have learned all the nitty-gritty about a Self-Directed IRA and are investing in their financial future. On the other hand, many new to the concept of retirement investing haven’t heard about what Self-Directed IRAs are and what they can offer.

There are several resources explaining what a Self-Directed IRA is. However, there are several tips and factors to know before setting up an account. In this article, we’ll dive into these tips to better understand Self-Directed IRA investing.

Choose Your IRA Custodian Wisely

Most banks, financial institutions, and trusts in the U.S. offer Self-Directed IRAs to income earners looking to invest for their future. However, not every custodian has your best interests in mind. It is essential to take your time to review a Custodian before signing up with them.

One of the first things you should consider is the custodian’s industry experience. A custodian who has been in the industry for several years has sufficient background on what services to offer to prospective investors looking to invest in Self-Directed IRAs.

Another factor to consider is their knowledge of traditional and alternative investment opportunities for you. Coupled with industry experience, the custodian will be able to guide you through the process of setting up an account. Also, their scope of service should be extended, not limited to some selected states. You need a custodian that can serve your best interest no matter where you are.

Choose Between Accounts Like a Traditional or Roth IRA

In the typical sense, Self-Directed IRA is a term roped up in an IRA investment plan for income earners. Self-Directed IRA can be either Traditional or Roth IRA. It’s up to you to choose what you invest in.

Traditional IRA allows you to save for retirement on a pre-tax basis. That means you won’t pay taxes on any contribution to your IRA until you withdraw it during retirement. Roth IRA allows you to save towards your retirement on an after-tax basis. This means you’re going to pay taxes on every contribution and allow it to grow tax-free in investment.

Watch Out For/Identify Prohibited Investments

When self-directing, there are strict rules surrounding what you can invest in. The IRS has clear rules regarding these prohibitions, and every income earner looking to set up a Self-Directed IRA should know them. Self-Directed IRA Custodians do not offer financial, legal or investment advice.

Some prohibitions include no personal use of the real estate investment, no self-dealing, no investment in S corporations, and removing disqualified parties such as spouse, children, and parents from having direct relationships with the investments.

Review The Alternative Investment Options

A Self-Directed IRA is quite different from the typical IRA plans. This is because alternative investment opportunities are open to investors. Some examples of alternative assets include real estate, tax liens, precious metals, privately held companies, private lending, and many more.

You should review these options and determine which ones suit your investment strategy best. Ensure that you’re comfortable with your decision before finalizing your investment. After all, with a Self-Directed IRA, the ball is in your court.

Carefully Select Your Investment

The job of selecting an alternative investment for your Self-Directed IRA is solely your decision to make. Custodians are tasked with ensuring that your investment asset is suitably qualified to be held in your IRA. You should discuss this with a financial advisor before selecting an investment option.

Contact TurnKey IRA at 828-608-0539 for a free consultation.  Download our free guide or visit us online at www.turnkeyira.com.

Ready to Learn More?

Get our free guide to self-directed IRA LLC, the most powerful weath building tool for your retirement.

By subscribing to SMS, you agree to receive promotional messages at the number provided. Consent is not a condition of purchase. Reply STOP to cancel. Message rates may apply.

Zero spam promise: we will never share or sell your information, period. Opt out of our communications at any time.

More from the Turnkey Blog

Do You Need ‘Checkbook Control’ in a Self-Directed IRA?

Do You Need ‘Checkbook Control’ in a Self-Directed IRA?

Many Self-Directed IRA investors are looking for greater control over their retirement savings. One way to achieve this is through a technique called ‘Checkbook Control.’ This allows you to move assets in and out of your IRA account as you wish, without having to go through the additional step of issuing a buy/sell order to …

Who is a Self-Directed IRA “Disqualified Person”?

Who is a Self-Directed IRA “Disqualified Person”?

Investing in a Self-Directed IRA comes with all sorts of great freedoms and flexible options. For example, you can use a Self-Directed IRA to invest in real estate, which opens up all sorts of interesting retirement investment possibilities. You can use an IRA to invest in private companies, precious metals, tax liens, or even open …

The ABCs of Investing in a Self-Directed Real Estate IRA

The ABCs of Investing in a Self-Directed Real Estate IRA

When you use a Self-Directed IRA, you’ll have the freedom and flexibility to invest in a wider range of alternative asset classes than many investors are used to. This can include real estate, which means investing in single-family homes, multi-unit homes, apartment buildings, condominiums, or even raw land and commercial property. In other words, investing …