The right way to set up a self-directed IRA

When it comes to IRA assets, investors must make sure that they are investing their money profitably and legally. To prevent prohibited transactions, especially with self-directed IRAs, those who are saving up for their retirement years must be on the lookout for fraudulent offers. Those who are aiming for a self-directed IRA should act accordingly: 

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1. Avoid investing in prohibited investments. An IRA cannot be invested in collectibles (art, antiques, gems, etc.), precious metals, and life insurance. When a broker approaches a potential investor to direct their IRA through these means, it is a fraudulent deal. 

2. Ask questions and check the broker's credentials. Setting up a self-directed IRA can be tricky for those who will be doing it for the first time. Before investing in assets, there should be a lot of questions. Factors such as valuation, liquidation, and distribution might determine if it's worthwhile to invest. FINRA also has a broker check that will reassure investors that their broker is competent. Doing personal research on the investment will also aid decision-making. 

3. Prepare for the risk and complications that might arise from the investment. For the average investor, getting a self-directed IRA investment might not be the wisest decision as it requires strict tax compliance. On top of that, investors who don't have a lot of funds might lose their savings with all the risks that might arise from the investment. However, high net worth individuals looking to diversify their portfolio should consider a self-directed IRA to optimize returns. 

Not all self-directed IRAs are illegal. Those who want to try this route may do so after spending time learning the facts, benefits, and by consulting with a trusted financial advisor. 

Image source: Investopedia.com

Barry Bulakites is the co-founder, president, and chief distribution officer of Table Bay Financial Network and is a recognized innovator and speaker in the field of financial services. He has, over the years, consulted for sports teams, pop stars, and various companies on setting up sustainable retirement plans. Visit this page for more information.

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