5 Secrets you don’t know about self-directed IRAs

Before deciding on a certain retirement plan, you should know about all the options available to you in great detail and also talk to a few people about it. You could be wasting precious time and money by opening up the wrong retirement account and by the time you realize that, it could be too late. The reason your financial adviser hasn’t talked to you about self-directed IRAs could be that they are afraid to lose your business or it could be that they simply do not know about it. Here is a list of facts about self-directed IRAs.

1. You can invest in non-traditional assets

With the more common retirement accounts including the 401k, you can only invest in stocks, bonds and mutual funds. The likes of these items are the only ones that are allowed by the Internal Revenue Service (IRS) for account-holders of the popular retirement accounts. Using a self-directed IRA, you have the option of investing anywhere that you think will fetch you a good profit.

2. You can borrow money from your self-directed IRA account

It is a common misconception that the IRS does not permit borrowing of money from an IRS account. You are allowed to borrow non-recourse loans within a self-directed IRA. All this means is that in the event of a foreclosure the person who lent the money will the right to take custody of the property by which the loan was initially secured.

3. You can invest with the help of private lenders

Most people stop investing when they run out of funds and the thought of borrowing money to keep the profits coming does not even cross their minds. You are fully permitted to borrow money from private lenders to continue buying real estate and pay part of your profit to the lender as interest. As mentioned in the previous point, even if foreclosure is filed by the lender, you are only liable to give back the property and not a cent more.

4. You can have control of your own funds

Unlike other retirement accounts, you can have control of your own money. The common term for this privilege is “checkbook control”. This means that you do not have to wait for your custodian or broker to approve of your transaction. This feature is especially helpful for time-sensitive investments where the window of opportunity is only open for a few hours. Another advantage of this is that…

5. You don’t have to pay transaction fees

Because you are making transactions yourself and are not asking anyone else to do it for you, you don’t have to pay for it either. Custodians deduct transaction fees after approving a fund transfer in retirement accounts where the account-holder is not given control of their money. The transaction fee may appear small at times but if you are an avid investor, those fees can pile up quite quickly. If, however, you do prefer your custodian to review transactions before making them, you have that option too with the self-directed IRA.

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5 Secrets you don’t know about self-directed IRAs