A Self Managed Funding Solution…

For the client who prefers to take the reins and expand his (or her) retirement portfolio (to include more diverse and non-traditional investments), a self-directed investment retirement account (IRA) offers potential for stability and higher returns.

What Is a Self-Directed IRA?
A self-directed IRA is no different from a traditionally managed IRA. With help of a custodian; for instance, a bank, broker or licensed financial planner, the account owner opens the IRA. Thereafter, he (or she) makes regular contributions to the account, subject to annual limits and other IRS rules.

Standard IRAs allow limited array of investments; however, self-directed IRAs give the account holder a broad path to choose diverse and unconventional investments. The custodian of an IRA maintains control of the account and has the authority to veto proposed investments. Despite the “self-directed” moniker, provided he (or she) share the investor’s values and vision, a financial adviser adds value.

What Are the Benefits of a Self-Directed IRA?
Two words: control and flexibility. Clients bring specific market or subject matter knowledge to the table that often goes deleveraged in traditional vehicles. For example, someone with a deep knowledge of the regional real estate market or a keen eye for small businesses with extraordinary growth potential cannot act on that knowledge within the confines of a traditional IRA. Holders of self- directed IRAs, may research investment opportunities and plan portfolio strategies based on risk tolerance. Thus, the account holder has power to cast a wider net over riskier waters.

The list of allowed investment types in a self-directed IRA is not infinite; as in life insurance and collectibles are excluded. Yet, from the following, with varied investments, investors have realized impressive returns:
Gold and silver
Tax lien certificates
Debt/loans/promissory notes
Business ventures and private placements
Commercial real estate and residential rental property

Follow the Rules:
It is important for advisers to remember tax-advantaged status of an IRA stems from an understanding an account benefits its holder. This benefit is in retirement. Thus, investments are structured so returns enrich the self-directed IRA, this self-direction is an arm’s-length relationship where an IRA owns the investments and exists as a separate entity from the account holder.

What Are Prohibited “Self-Dealing” Transactions?
Like all tax-advantaged investments, self-directed IRAs are subject to rules of the Internal Revenue Service. The most strong prohibition is “self-dealing practices”. This self-dealing nullifies an account’s status as an IRA. Invariably, the account owner cannot enter deals using an IRA. Prohibited transactions include selling one’s own property to the IRA, borrowing funds from it, receiving services from it or performing services for it.

Opening a self-directed IRA is a serious undertaking. Managed intelligently, this account yields appreciable retirement saving growth. Furthermore, this growth is unmatched by a traditional IRA. Still, approached carelessly, without assistance of a qualified adviser, a self-directed IRA becomes an unnecessary burden.

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