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Is a Self-Directed IRA Right For You?

A Retirement Account Is a Good Idea For Anyone

It’s important to save for retirement and I firmly believe that everyone should be saving money for when that day comes. You can’t necessarily count on the government to take care of you in your golden years. A retirement account is a good idea for anyone, whether it’s an IRA, 401(k) or some other type of retirement plan. However, a Self-Directed IRA is definitely not for everyone!

Let’s start by defining this term; a “Self-Directed IRA” is a retirement account that allows you to invest your money in something other than the stock market. This includes things like real estate, stock in private companies, loans to companies or individuals and precious metals, just to name a few. This type of IRA places a lot of responsibility for the account holder.

As the Self-Directed IRA account holder, you are required to find your own investments and do your own due diligence. You are required to have an IRA Custodian who holds your funds, do investments on behalf of your IRA based solely on your instructions and reports to the IRS. IRA Custodians should not give tax or legal advice or recommend any investments.

Intrigued? Learn more about the responsibilities of an IRA custodian and what a company like Sunwest Trust can do for you.

Are You An Ideal Candidate?

So, back to the question at hand; is a Self-Directed IRA right for you? The ideal Self-Directed IRA account holder is someone who already has knowledge of a particular type of investment and knows the ins and outs of how that investment strategy works. For example, let’s say you’re a realtor. You know the process of buying property. You also know where to find a property to buy and how to evaluate it to determine if it’s a good investment. In this scenario, you are well equipped with the knowledge and expertise to make a wise investment in your Self-Directed IRA.

Another good example would be someone with a background in banking. You understand the time value of money and how loans work. You also understand the paperwork that should be involved and what to do to mitigate the risks associated with loaning money.

For the more casual investor, let’s say you simply want to hold precious metals in your retirement account as a hedge against inflation. A Self-Directed IRA would be the perfect tool for you to accomplish this goal.

These are just a few quick examples. There are tons of ways to invest your money. The point is that having previous knowledge of a particular investment is a key indicator that you would be a good candidate for a Self-Directed IRA.

Would you like to learn more about what is a self directed IRA and why you may want one, check out our article by clicking the link?

Now let’s talk a little bit about who should not have a Self-Directed IRA. If you are a passive investor who either doesn’t have the desire or the time to devote to educating yourself on different investments, a Self-Directed IRA may not be for you. These types of investors are probably better off finding a trustworthy financial planner who can help them invest their money. Although it’s not a requirement to have previous knowledge in a field before investing, it’s wise to educate yourself before you make any financial decisions.

Watch OUT For Fraudulent Investment Schemes

Last, be wary of fraudulent investments. Self-Directed IRAs are a wonderful tool for investing your retirement money, but unfortunately, they are also targets for scams. Would-be swindlers target IRAs because the funds are often readily available and many people are more willing to invest their retirement money rather than coming out of pocket for an investment. Beware of anyone who contacts you out of the blue with an unbelievable investment opportunity. Many of these “so-called” investments tout the arrival of some new technology, which will change the world and offer great returns for investors. If you ever hear the words “guarantee” or “insured investment”, turn and run the other way! There are NO guaranteed or insured investments, other than FDIC insured accounts, which have small returns on investment.

Always make sure to speak with a CPA or tax professional before making any investment decisions.

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.