Self-Directed IRAs/Freedom to Invest in Assets You Understand
By Kaaren Hall, CEO/Founder of uDirect IRA Services, LLC
When it comes to retirement, there is a huge deficit between what we have as Americans and what we need to retire. Everybody should pause and think, how much money do I have saved for retirement? How long could I live on that if I quit my job today? Most of us may realize we need a lot more than what we have put away. No matter what you do, it’s crucial to save for retirement. Americans are living longer than ever. How are we going to live until we’re 102 if we’ve only saved enough for until we’re 72 or 82?
With self-directed IRAs, you can invest in what you know best, outside of the stock market. Some people may want to invest in real estate, which is what most people want to invest in. Or they may want to invest in precious metals, or buy performing or non-performing notes. They can open an account, fund the account, and then invest that money. Everything stems around those three processes.
With Self-Directed IRAs, you aren’t told what to invest in, and commission isn’t taken from the profits of your investments. uDirect IRA Services acts as independent administrator that helps the account-holder through the transactions/investments held by the IRA..
The number one misconception people have about self-directed IRAs is that they can be used like personal cash. The IRS has rules called prohibited transactions, so there are things that you can’t do with an IRA that you can do with personal cash. Also, your IRA cannot be a down payment on a regular loan. (You can’t personally guarantee a loan to the IRA either). An IRA is for investment purposes and it is for retirement purposes. You can’t have present benefit, personal benefits, or indirect benefit.
For example, my IRA can’t lend money to you and then have you invest in my company because I’d still be benefiting indirectly from my IRA . Some people are disallowed to the IRA, like your spouse, ascendants or descendants, so your IRA can’t do business with any of these people. Any disallowed person has to stay arms-length from your IRA transactions and cannot provide goods, services, or facilities to the plan. If you are a real estate agent, for example, and your mom wants to take her IRA and invest in real estate, you can’t be a listing agent or buyer broker even for free, even if you are not compensated, because you’d be providing services to the plan and you are a disallowed person in that case. These are common misconceptions, because though the rules are simple, you can’t believe how broadly they apply.
Since you’re going to get to retirement one way or another, you might as well get there with some financial stability. Earnings in an IRA are not limited by the IRS. Your IRA can earn as much as it possibly can. However, you can only put so much into a retirement account (contribute) because of contribution limits, so you may not want to put the precious money you’ve worked hard for in the hands of an anonymous fund manager who manages stocks. Always make sure you do your due diligence before investing. Look on the internet to research the people you are investing with. Ask others who have invested in similar deals. You can learn a lot from a small amount of time spent on your computer researching your deal.
Self-directed IRAs can give you the freedom to invest in asset classes you understand. It’s a powerful tool to use so you can save and provide yourself with a comfortable retirement.