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Self-Directed IRA: What It Is & Why You May Want One For Your Retirement?

Hi! My name is Terry White. I’m the CEO of Sunwest Trust.

These videos are brought to you strictly as educational videos. They should not take the place of a qualified tax professional or CPA. But today, we’re going to talk about “Do you need a self-directed IRA?”

So, if you’re just an individual who doesn’t really understand a lot about investing, doesn’t want to get out and learn about investing on certain things, maybe the best thing for you would be just to buy bank CDs or to put your IRA money in a mutual fund. I would strongly recommend that an IRA by itself is something that everyone needs, and I would encourage everyone to have their own IRA and make as big a contributions as you can on an annual basis, staying obviously within the rules of the IRS.

But then, a self-directed IRA is a little bit different animal. And what I mean by that is I think the best person suited for a self-directed IRA is someone who understands how a particular investment works. So if, for instance, you understand how lending money works, you’re maybe a banker or you’ve had some finance background, something like that, and you understand how lending money and getting paid back and the time value of money and those kinds of things, that might qualify you as a person that would be able to manage the investments inside their IRA. And in that instance, a self-directed IRA might be a very good thing.

Maybe you’re someone who understands real estate. Maybe you’re a real estate broker or maybe you’ve just been a real estate investor. You’ve bought a few properties. You’ve done pretty well with them and you understand how that works. You might be a realtor, for instance. So that might be the type of person that would work well. You’d be able to use a self-directed IRA well and do good with it.

The other person is maybe you know something about precious metals or maybe you don’t know anything about precious metals, but you want some kind of a hedge against inflation. So, maybe you might want some precious metals in your retirement account. In the event, things go bad and the value of the dollar goes down or something like that, that might be the type of person that needs a self-directed IRA.

I would say the type of person that does not need a self-directed IRA is the one who gets a phone call in the evening when they’re at home and the guy at the other end of the phone or the gal on the other end of the phone is telling you what a great investment this is, that it’s new technology. You know, it’s a brand-new technology that nobody knows about. Maybe it’s a movie that’s going to maybe be the next Star Wars saga, something like that. Those are the people that don’t need a self-directed IRA. You don’t want to take that kind of phone call and run out and start a self-directed IRA and send that person the money.

Now, I’m not saying those are all not legitimate investments but be very, very careful. Make sure you understand what you’re investing in. Make sure you understand how that investment is going to pay you back. Don’t just take someone’s word for “Hey, this is a great investment. It’s going to be the next Google.” Unless you understand how that can happen and you agree with that, don’t just jump into something because they’re offering you great returns.

If you hear the words “guaranteed” or “insured” or “can’t lose your money”, run as fast as you can because nothing is guaranteed. The closest thing to being guaranteed is FDIC insurance at your local bank, but those pay lower yields. So, you have to realize that the risk that you’re taking is in direct proportion to the reward that you’re going to get. So, the higher the risk; the higher the reward.

I hope this has been beneficial for you. I hope now you understand that maybe a self-directed IRA isn’t for everyone. Maybe it isn’t for you and that’s okay there’s nothing wrong with that.

Again, I encourage you to make an investment in a self-directed IRA even if you just buy a bank CD, put some money in there because we’re all going to get to that age where we want to retire. And if you haven’t prepared for it, it’s going to be a more difficult thing to do. So, keep that in mind.

Also, keep in mind that these videos are for educational purposes only. I’m not giving an investment advice. That should only be done by a qualified professional and someone that you know and trust.

So, watch these videos, subscribe to this channel. We’d love for you to do that. We put out videos once a week and we’ll look forward to talking to you again next week. If you want more information about this, go to Sunwest IRA, our podcast and there will be longer, more detailed information on the podcast about these particular subjects. Thank you very much for listening and watching, and I will talk to you next week.

Terry White

About Terry White

I started my business career after getting my degree in Accounting from the University of New Mexico in 1983. My first job was as a controller for a local title company, and in 1987 I started First Financial Escrow, Inc. Over the years I played a part in several startup companies including First Financial Equities, Inc., First Financial Trust, Inc., First Financial Marketing, Inc. and Asset Ventures, Inc. In 1997 First Financial Escrow, Inc. was able to purchase the escrow accounts from Sunwest Bank and changed its name to Sunwest Escrow. As the market changes, Sunwest has grown and changed along with it. Besides my wife, Sheila, we have three boys, two daughters-in-law, one grandson, another grandson on the way and a future daughter-in-law. Sunwest is my passion, and I enjoy coming to work every day to see what will happen next. I enjoy fly fishing, spending time in Colorado, biking and watching my boys play soccer.