A self-directed IRA is an IRA held by a custodian that allows you to invest in a larger set of assets than is allowed by most IRA custodians. Depositaries of self-managed IRAs are exempt from most investor obligations and may allow investors to invest retirement funds in “alternative assets”, such as real estate, promissory notes, tax lien certificates and private placement securities. Investments in these types of assets may involve unique risks that investors should consider. These risks may include a lack of information and liquidity, as well as the risk of fraud.
A self-directed IRA custodian is not a financial adviser or a tax advisor. They won't give you specific investment advice; rather, they'll carry out the investment decisions you make. This puts you in the driver's seat of your own retirement plan. This can be a big boost for many investors who prefer to make more investment decisions on their own.
An IRA depositary, such as Pacific Premier Trust, is a highly regulated bank, credit union, or non-custodial bank that is allowed to guard the assets of an IRA. Both the state and federal governments supervise custodians, and there are strict internal policies, procedures and controls. The truth is that there are few limits to what you can invest with a self-directed IRA, and the limits that exist are reasonable. With normal IRAs, the depositary (usually a bank or brokerage firm) limits investment options to approved securities, such as stocks, bonds, exchange-traded funds (ETFs) and mutual funds.
If you are a financial professional looking for a self-directed IRA depositary for your clients, it's important to select a custodian with a complete advisor support system. A self-directed IRA is a type of individual retirement account that allows you to save for retirement with assets that are prohibited for conventional IRAs, including precious metals, real estate assets and cryptocurrencies. There are several ways that scammers can attempt to use self-directed IRA accounts to commit fraud against unsuspecting investors. If you are concerned about market volatility and inflation, it is best to have government securities protected against inflation, such as funds that invest in inflation-protected Treasury securities (TIPS), which you can keep in a normal IRA.
A self-directed IRA depositary is a financial company that maintains its retirement investments for safekeeping and manages the account in a manner that complies with government and IRS regulations. This makes it very important to thoroughly research anything you want to buy for a self-directed IRA, points out Scott Klauenberg, financial planner at Klauenberg Retirement Solutions. They are not responsible for researching the quality or legitimacy of the IRA investment options they offer. Some self-managed IRA accounts allow investing in so-called “digital assets”, which include cryptocurrencies, coins and tokens, such as those offered in so-called initial coin offerings (ICOs).
Just keep in mind that they are more complicated to manage and come with more additional fees than regular IRAs. In other words, think of the custodian as a buffer; you're more independent with a self-directed IRA, so a custodian is there to make sure that you do everything the right way. Below are some important questions that will help you identify the right custodian for your self-directed IRA:. There is a lot at stake with self-managed IRAs, because if you violate one of the IRS's strict rules about the investments you have in retirement accounts and how you use them, your entire self-directed account could be liable and penalized.
Investment flexibility is the main advantage of self-directed IRAs, says Syet Nishat, a partner at the Wall Street Alliance Group. The SEC's Investor Education and Promotion Office issues this investor alert to warn investors about the risks associated with self-managed individual retirement accounts (self-directed IRAs). .