I was making my usual rounds of retirement and investing news and I stumbled upon a great article by The Motley Fool, “Why You Need a Self-Directed IRA“. I liked it enough that I thought I would summarize it if you don’t want to read the whole article. The following are some of the reasons why a self-directed IRA are a great option according to the article and hopefully most of them you already know. If not, hopefully you can gain some knowledge that will help you move to a better more diverse retirement nest egg.
Motley Fool’s reasons to invest with a self-directed IRA
- You get to ramp up your retirement savings an extra notch because a whole new universe of potential investments are offered to you.
- A self-directed IRA opens up the IRA and allows you to invest in all the things that are legally allowed inside of an IRA. Popular belief that an IRA can invest in just stocks and bonds is misguided.
- While stocks can be a great investment they are by far not the only types of investments out there. There are other things that you can invest in that have a much greater profit potential than a typical stock or fund.
Motley Fool’s Challenges of Self-Directed IRAs
- Tax rules surrounding self-directed IRAs are complex. A single misstep can have huge consequences.
- Self dealing is a big issue. You can’t do it and need to be aware of it. For instance, You cannot your IRA assets in a business in which you act as a corporate officer or hold a controlling interest. Also, you cannot own a vacation home that you use for personal use in an IRA.
- You cannot combine personal assets with your IRA assets in order to purchase an IRA investment.
- While these are not all the rules you need to know the ones that matter or you face the possibility that you jeopardize the entire tax-exempt status of your IRA. This could potentially make every penny of your retirement account taxable and subject to penalties.
Author: Nick Barker