According to the Internal Revenue Service regulations, for conventional IRA account holders, a custodian such as a financial institution or a trust should hold the assets on behalf of the account owner. This part of the contract adds quite a few costs that can accumulate quickly and eat into your profits if you are not careful. In today’s financial environment, where interest rates are largely on the lower side, it is important to save every bit of cash wherever necessary. One thing that the typical investor today can certainly do without is the custodian fees.
With a self-directed IRA, you can not only invest in assets other than the traditional stocks, bonds and mutual funds, but you also do not need a custodian to conduct transactions on your behalf. Instead of paying your custodian, say $25, for every time you want to pay the lawnmower or the plumber for servicing your real estate, you pay a flat annual fee and make as many transactions as you want and keep as much money as you want in your self-directed IRA. It is important to remember, however, that if you want to withdraw money from your self-directed IRA before reaching the retirement age of 59.5, you will have to pay a 10% penalty.
You can maximize your chances of earning big profits by diversifying your investment portfolio using a self-directed IRA. As mentioned above, you can use your self-directed IRA to invest in assets beyond stocks, bonds and mutual funds. The more asset types you invest in, the higher will be your chances of earning big returns, while at the same time cushioning you from if you are hit by market fluctuations. In other words, it is a win-win situation for everyone: you, your financial institution and the IRS.
To learn more about, Why a Self-directed IRA is a Top Retirement Option, Click Here
How to Make Efficient Investments without Spending a Fortune on Custodian Fees
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