IRA stands for Individual Retirement Account. It is actually a kind of retirement investment plan, but there are features that are unique to a self directed IRA plan that makes it stand out from its regular counterpart.
Self directed IRA is a retirement saving approach where the account owner is required to oversee decisions concerning investments on behalf of the retirement plan provider. Self directed IRA differs from the more traditional IRA in that, that the account holder of the self directed IRA has the responsibility of directing investment choices instead of having the trustee or custodian in charge of the account calling the shots at all times.
A thing to note on the above point is that the IRS requires a qualified trustee or custodian to hold the IRA assets on behalf of the owner. The trustee is responsible to manage and maintain these assets alongside all the transactions and records pertaining to invested assets.
Another thing worth noting here is that the self directed IRA does not necessarily need to have an administrator. However, it is recommended that you use the services of an administrator as you will need the help of a certified account administrator to keep your investments in order and make sure that they comply with government regulations.
A self directed IRA also has the ability of housing several retirement accounts. Some of these retirement accounts include the 401(k) plans, standard IRAs, qualifying allowances, and educational IRAs. The major expenses of maintaining a self directed IRA is keeping an account administrator. This is because they offer exceptional services hence you will need to keep them well paid.
People might be asking if there are disadvantages of investing in a self directed IRA plan. The answer is quite an ambiguous “yes”. The main disadvantage of self directed IRA is that the account holder is in charge of the account. This may prove to be an adverse option, especially if the individual lacks managerial skills and financial knowledge. This is the reason why such people are better off with the regular IRA plan for retirement investment.
Another feature of a self directed IRA is that you cannot invest in anything that the IRS collects revenue from. These include precious metals, gems, antiques, and rare alcoholic beverages. However, real estate investments are allowed using the self directed IRA funds. There are no limits to this kind of investment, be it you are investing in a family home, residential apartments or that condo on top of the hill.
Self directed IRA is often a suitable option for those who understand asset management well. Such people can reap the benefit of decision making power of these funds and maximize their returns with their financial wisdom and managerial skills.