From a technical standpoint, a self-directed IRA is similar to any other type of IRA with the exception of there being different options for investment. For instance, most custodians of IRAs can only allow approved stocks, bonds, CDs, and mutual funds. In self-directed IRAs, those same types of investments are allowed, as well as private placements, notes, real estate, and tax lien certificates, among others.
Although many investors have never heard of self-directed IRAs, they were first created decades ago. Of course, the Internal Revenue Service (IRS) has always allowed investing in things like stocks, bonds, and mutual funds.
Dating back to 1983, Equity Trust has been a custodian of alternative investments, including real estate. As an increasing number of investors wanted more control over their finances and futures, the popularity of self-directed IRAs grew. Today, self-directing your IRA is a viable option with many benefits that are worth researching.
In addition to having more investment options by self-directing your IRA, there are other benefits. For example, you will enjoy asset protection, tax-free profits, estate planning, tax deductions, and more. You will also have the opportunity to invest in tax-free investments that you understand and are familiar with to create long-term wealth.
Under the IRA rules, self-directed IRAs are allowed as long as all relevant rules are followed. As expected, there are very specific rules associated with IRAs, in particular those that are self-directed. Therefore, it is important that you conduct extensive research or work closely with a qualified CPA or other financial advisor.
When self-directing your IRA, there are only three steps. With those, you will soon enjoy tax-deferred profits.
- Identify the Investment
- Process the Investment
- Manage and Sell the Investment
Disclaimer: The Company introduces general information and education concepts about self-directed retirement accounts (such as 401(k) and IRA accounts). Like any investment, there is risk in using retirement funds for investing in real estate assets. It is possible to lose a portion or all of an investment in real estate – including those purchased with retirement funds. Please review IRS Publication 3125 regarding the use of retirement funds for alternative investments. The document can be found at: http://www.irs.gov/pub/irs-pdf/p3125.pdf. Every individual is different, with unique circumstances. We do not offer tax, accounting, financial or legal advice. Prior to acting upon this information, you may consult your own accounting, legal and financial advisors to evaluate the risks, consequences and suitability of that transaction. The Company is not a retirement account custodian, trustee, or securities dealer.