Do You Qualify for a Self Directed IRA?

Estimated reading time: 3 minutes(Last Updated On: January 14, 2020)

There are many investment options for those wishing to save for retirement. Most people focus on the traditional investment options like stocks, bonds and mutual funds. These investment options are offered with retirement accounts that include a Traditional IRA, Roth IRA and a 401k if that is typically offered through their workplace. One commonly overlooked option for retirement investing is the Self Directed IRA.

In reality it was created when IRAs were created in 1975. Many people think that self-directed IRAs are a different type of IRA but that is completely wrong. Some institutions that hold IRAs and other qualified plans limit your investment options even though the IRS does not. A self-directed IRA simply allows you the broadest possibly spectrum of investment options. If you want to invest in opportunities like real estate, private investments, and even offer loans and mortgages, consider a Self Directed IRA. Upon considering this investment option your first question might be “Do I Qualify?”

What Is A Self Directed IRA?

A Self Directed IRA is an investment tool that provides you with more investment opportunities. It is facilitated by a financial institution, administrator or a custodian. While a Self Directed IRA is more flexible, there are only a few rules and limitations. You cannot invest in collectibles, life insurance, or S corporations. You also cannot use the funds to benefit a beneficiary or other disqualified person. A disqualified person is someone who is a family member (lineal ascendant or decendant) or custodian of the account.

What are the Benefits?

The benefits of starting a self directed IRA are vast. You’re able to diversify your investments into other avenues including potentially lucrative ones like real estate and loans. You can save more money for retirement.

What Do You Need to Get Started? What are the Qualifications?

Once you’re ready to get started with a Self Directed IRA there are a few things to know the first is that anyone can open a self directed IRA. Understanding that, here’s what you need to know.

  • There’s more control – there’s also the potential for more reward. Many experts recommend starting a self directed IRA with 10-20% of your existing IRA savings. You can essentially roll over a bit of your retirement savings into a self directed account.
  • The rules are a bit tricky. It’s important to understand what is and isn’t allowed. You cannot, for example, buy your own home with self directed IRA funds. But you can buy a home and rent it to someone else.
  • You need a custodian; one you trust. Many financial institutions offer Self Directed IRA’s. Look for one that has experience and is knowledgeable in the investment opportunities you’re interested in. The fees for custodians vary, and most agree that you get what you pay for.
  • You need a bit of investing confidence and know-how. It’s called “self directed” because you’re the one who is making the investment choices and decisions. It’s important to be somewhat knowledgeable about investing. That being said, you can learn and use your custodian as a resource.

Anyone can open a Self Directed IRA and they’re easy to open. If you want to save more for retirement and you’re tired of watching your existing savings sit idly, earning little or losing money, then it’s a good option to consider. Contact Quest Trust Company to open your self-directed IRA account today!