A Self Directed IRA is a retirement plan wherein the holder is in-charge of his investing choices. The Self Directed IRA gives the investor a bigger opportunity for diversifying his assets outside of the traditional type of investment, meaning stocks, bonds, and mutual funds. All securities are held under the IRA account administered by a custodian or a trustee. Life insurance and collectibles are forbidden as investment options Self directed IRA does not permit investments to be used privately. IRA account holders should be accountable for their actions as the IRS provides so.
Self Directed IRA also has its Pros and Cons. The good sides of this type of retirement plan are; growth of your IRA account, capitalizing in real estates, mortgages, etc.. Profit generated will be automatically saved in the IRA account. This type of investment plan will let your account grow faster than that of investing in stock, bonds and mutual funds. These traditional types of investments will only give you slow growth for you can only earn on the interests imposed on them. You can then establish a Limited Liability Company (LLC). The LLC allows you to control your own investments without the transaction-based fees of custodians. This is because of the “checkbook control”.
Now here are the cons of Self Direcrted IRA. Self Directed IRA is also involved in the investment of real estates. However, this isn’t easy; you needs to study the pros and cons of the market or you’ll be in a very steep position. Do your assignments first. Learn more on how the business works and runs. You also need to know how the market works. These are all needed because you are the one in control of your investment and you don’t want to lose everything that you have worked for. Because when all else fails, you can only regret but not return the things you have done. Possessing Self Directed IRA assets isn’t a piece of cake. A thorough learning about possible investments should always be done. Pay full attention to your investments. Make sure you generate income, not losses.
Rules and regulations should always be followed. Because if you don’t follow and fully understand this rules you might be facing yourself with prohibited transactions. Taxes and penalties will be applied for violations of the said codes. This will cause a big problem on your Self Directed IRA.