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Beginners Guide To Self-Directed IRA’s: What You Need To Know

self directed iras
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Self-directed IRAs can acquire real estate, hold mortgages and notes, private placements (such as LLCs and trusts), precious metals, invest in foreign currency and participate in futures trading and other investment options.

Many millennials feel the pressure of student loans bearing down upon them and it can be terrifying trying to figure out how to get rid of all of that debt. On top of worrying about your current financials, you have everyone under the sun telling you to plan for your retirement.

You’re probably thinking, “With WHAT money!? How can I get out of debt while saving for retirement at the same time?”.

It can seem overwhelming. That’s where Self-Directed IRAs can come in handy for you.

Self-directed IRAS can do the same thing as Traditional and Roth IRAS such as hold the traditional stocks, bonds, and mutual funds. They provide more options for the more savvy investor as they allow you to invest in alternative investments which is a very attractive feature.

The Basics: Traditional and Roth IRAs

An IRA is an Individual Retirement Account. These accounts are provided by an assortment of financial institutions and they are tax-advantaged. There are a few different types, but for now, we’ll stick with the basic two: Traditional IRAs and Roth IRAs. Traditional IRAs are tax deferred accounts.

What this means is that in addition to the tax deduction you receive for contributing to your IRA, your earnings within the IRA (interest and gains) are also deferred until you distribute. When you withdraw money from your IRA, it is taxed as ordinary income. Roth IRAs are a bit different.

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There are contribution limits for Roth IRAs and the contributions you make are not deductible. The big draw for a Roth IRA is if you meet certain requirements when you take money out, it is tax free.

Self Directed IRAs Guide

With an IRA you can invest in things like stocks and bonds. With a Self-Directed IRA, your options become a little broader. Are you well versed in real estate? You can invest in that. Do you like the security of precious metal investments?

Invest away!

Maybe you’d like to invest in real estate? No problem!  With self-direction, you can pick something that you are familiar with and invest to your heart’s content.  When you self-direct, you are in the driver’s seat. You can invest in ways that other IRAs and 401ks can’t.

Having a wider array of investment options isn’t the only bonus of self-directing your IRA. It may seem like you need a lot of money to start investing. However, the truth is you can start with whatever you feel comfortable with.

Once you begin investing, you’ll gain the experience you’ll need to feel more comfortable with your decisions and invest more. Investing your money can seem scary at first. You can go your own pace and stick with what you feel most comfortable with.

Gail Poyner

Gail Poyner is 26 years old and works for Next Generation Trust Services, a third party administrator of Self-Directed IRAs. When she’s not working or researching, she can be found playing video games or knitting. If you want to learn more about self-directing your retirement, you can email [email protected] or [email protected] .

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