Not only can you manage your own individual retirement account, but lackluster performances by a traditional manager/stock portfolio arrangement might make it seem like a better idea all the time. Financial advice service The Motley Fool suggests that many IRA companies offer limited choices of stock and bond investing simply because it's less complicated. Luckily, motivated investors can seek out IRA specialists that allow for a broader range of investment.
It's no secret that owners of retirement accounts like traditional IRAs, Roth IRAs, SEP-IRAs and 401k plans can decide to eliminate the middleman, take control of their own portfolio and venture into different (perhaps more profitable) types of investments. The controlling factor in making this decision is whether or not you will take the time to educate yourself to the extent necessary to chart your own path. This is critical. We're talking about how you're going to fund your golden years, so don't even try it unless you can first invest the time to truly learn your options.
Using your favorite search engine, a simple search on the term "self-directed IRA" should return a list of companies that specialize in that financial product. There's no rule preventing you from doing this, even if you already have an active account with your employer. You'll simply contact the company of your choice and ask to speak to someone about opening a self-directed account. After it is up and running, you can roll the proceeds from your old managed IRA into your new one, if you choose.
Most managed IRAs limit your investment choices to stocks, bonds and mutual funds, for simplicity of administration. Unfortunately, that leaves a host of other choices on the table, some of which might deliver higher returns than the traditional Wall Street average. Some investors might prefer to pad their portfolio with private stocks not listed on any exchange, precious metals like gold, or even real estate. With a self-directed IRA, all these options will be open to you.
Investing in real estate through your self-directed IRA requires that you pay strict attention to details. The land you purchase must be of an investment nature completely, which means you can't maintain the incredible tax benefits of the purchase if the IRS decides it falls under the category of "personal use." Also take care not to commingle personal assets with those of the IRA. The company you choose to open the account with should be able to bring you up to date on all the rules regarding investing through a self-directed IRA to keep you out of tax trouble.
- SelfDirectedIRA.org: Self-Directed IRA
- The Motley Fool: Why You Need A Self-Directed IRA
- SEC.gov. "Investor Alert: Self-Directed IRAs and the Risk of Fraud." Accessed July 7, 2020.
- IRS. "Retirement Topics - Prohibited Transactions." Accessed July 7, 2020.
- IRS. "What if I Withdraw Money From My IRA?" Accessed July 7, 2020.
- IRS. "Traditional and Roth IRAs." Accessed July 7, 2020.
Derek Dowell has ghostwritten dozens of projects and thousands of blogs in the real estate, Internet marketing and travel industry, as well as completed the novel "Chrome Sombrero." He holds a Bachelor of Science in environmental legal studies from Missouri State University.