Hidden Benefits of a Self-Directed IRA
Planning for retirement can be a daunting task. With the unreliable future of government assistance programs and fewer companies offering severance and 401K plans, preparing for the future rests on our shoulders.
There are many options for retirement available, but one option grants the account holder control of their assets: self-directed IRAs.
Self-directed IRAs give investors the power to select their assets, allocate funds, and build up a portfolio to serve as a nest egg. In addition to overseeing your retirement fund, SDIRAs have several hidden benefits that can help you build a secure future.
#1 – Tax advantages can boost your overall wealth.
Opening a self-directed IRA can provide account holders with tax advantages that allow for greater overall growth. Investors can choose between a traditional IRA or a Roth IRA. The traditional IRA contributions grow tax-deferred; when depositing, you are given an up-front tax break and your account benefits as the full amount accumulates over the years.
These contributions are only taxed upon withdrawal after you reach retirement age. By that time, account holders are usually in a lower tax bracket. Roth IRAs, on the other hand, are tax-free on withdrawal. Though users don’t benefit from the immediate tax break of the traditional IRA, any withdrawals made after retirement are tax-free.
#2 – Easy Rollover Process
If you own another IRA or 401K and wish to open a self-directed account, the transfer is very simple. Funds can be rolled over immediately, provided you haven’t transferred any funds in the past year. The process is quick and can easily be set up with IRA custodial assistance. After you roll over to your new SDIRA account, all that’s left to do is select your assets.
#3 – Diverse Investing
A huge benefit to opening a self-directed IRA is the expansive investment market. Unlike the more traditional funds, SDIRAs are not limited to bonds, stocks, and mutual funds. Self-directed accounts open many alternative asset possibilities. Account holders can explore real estate, tax liens, mortgage notes, precious metals, or even new age assets like cryptocurrency.
Having more options allows you to invest in more; you can take advantage of any previous market knowledge you have to build up your retirement fund. This approach gives you a chance to capitalize on what you know and to avoid making any blind investments.
#4 – Portfolio Security
With so many options available to you, you can build a versatile portfolio. Account owners don’t have to put all their eggs in one basket. In fact, investors can benefit greatly from having a few options in their investment portfolio.
With so many options, you can select a few slow-growing options and pair them with a few investments with quick returns. The ability to spread your funds can give you added security should one of your assets fail to turn a profit. Selecting a diverse portfolio is the best way for SDIRAs owners to take advantage of safe investment.
#5 – LLC Transactions
SDIRA owners have the option of opening a limited liability company under their IRA’s name. If you are interested in having complete control over your account, you can take the steps to open an LLC. By doing so, you become the manager of the LLC, which grants you “checkbook” control. This is beneficial especially if you are investing in markets that require immediate action.
All self-directed funds must have an IRA custodian, as per IRS regulation. All transactions must go through your custodian, which costs time and money. Having an LLC allows you skip the middleman, giving you more control over your account funds for faster transactions, fewer fees, and more freedom.
#6 – Secured Assets
Life is often unpredictable, which is why it’s imperative to have added security, especially when it comes to your retirement fund. Should you fall on hard times, even on the verge of bankruptcy, you want to be sure your assets are protected. Self-directed IRAs are protected against federal bankruptcy laws. Anything placed in your IRA cannot be touched by the government, regardless of your current monetary situation. Whatever you place in your SDIRA is secure for you and future generations.
#7 – Wealth for the Future
A self-directed account can not only benefit you, but also your children and beyond. SDIRAs can provide you with a solid nest egg, but should the unexpected happen, that nest egg can live on and continue to accumulate funds. Account holders can pass down their SDIRA to their spouses, next of kin, or even their grandkids. After you pass on, with little to no tax complications, your account moves to your beneficiary and it can continue to grow for generations.
If you are self-starter looking to take charge of your own retirement, a self-directed IRA may be the best choice for your future. Any investment should be carefully considered and it’s imperative to perform your due diligence before taking on big investments. Evaluate your skills, your current financial state, and decide if you have the time to dedicate to personally handling your future investments. For more, contact a Horizon Trust custodian today.