How a Self Directed IRA Differs From Other IRAs

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

When it comes to saving for retirement you have an abundance of options. In fact, you probably have more investing options than you’re aware of. In addition to traditional IRAs that may offer stocks, bonds and mutual funds you might also consider a self-directed IRA. At Quest Trust Company, Inc., we are dedicated to providing investors with professional support and education so that they can take control of their own financial future.

Why An IRA Is A Good Investment Choice

The Employee Retirement Income Security Act (ERISA) was passed in 1974. ERISA passed the responsibility of saving for retirement from the employer to the employee. It put American citizens in control of saving for their own retirement. In response to ERISA, IRAs were created in 1975. The provided investors with the ability to save tax free money for retirement. You don’t pay taxes on the income you invest or the investment earnings within the IRA until you withdraw those funds during retirement.

The Downside of an IRA with a Traditional Custodian

IRAs with traditional financial institutions limit your investment options. You can generally only invest in stocks, bonds or mutual funds or any publically traded asset. That’s fine for many if the market is doing well. However, these restrictions on investment opportunities can limit your ability to earn and save for retirement. As with all IRAs, there is also a limit to the amount of money you can contribute annually. You have limited control and limited choice.

What is a Self Directed IRA?

A self-directed IRA differs from a traditional IRA in that you are in the driver’s seat. You decide where you invest your money. It also opens the door to more investment opportunities including real estate, loans and investments in private corporations.

Both traditional and Roth IRAs can be self directed. In fact, if you have an existing IRA you can simply contact your financial institution and have it converted to a self-directed IRA. This step, however, generally doesn’t open any new investment opportunities. Many traditional financial institutions that offer self-directed IRAs alongside traditional IRAs don’t broaden the scope of investments.

You can, however, find a custodian that is skilled and knowledgeable in handling non-traditional investments. Our highly trained staff has wide experience in real estate and non-traditional investments like oil and gas, precious metals and private placement.

The Benefits of a Self Directed IRA

The benefits of a self-directed IRA are numerous. You’re able to broaden your investments and thus diversify your portfolio. You also have the potential to invest in more lucrative markets and thus earn more. And it puts you in control of your retirement savings. We’re proud to put people in the driver’s seat of their finances through our comprehensive administrative support and education programs. But while the benefits of a self-directed IRA are substantial, they are not the right choice for everyone.

Is a Self Directed IRA Right for You?

In general, most people who have an IRA savings account can benefit by converting it to a self-directed account. However, before you take this step, ask yourself the following questions:

  • Do you want to save more for retirement? Do you want your investments to go further?
  • Do you want the opportunity to invest in businesses, precious metals, oil & gas, real estate, private stock, and much more?
  • Do you have the funds in your existing IRA or 401K to roll or transfer into a Self Directed IRA?
  • Do you feel confident and knowledgeable about investing or are you comfortable asking questions and learning more about investing?

Talk with your financial advisor and check with your current financial institutions to see what’s available. If you want to earn more savings for your retirement, consider rolling over a bit of your existing retirement savings into a self-directed IRA. Quest Trust Company, Inc. will be there every step of the way to guide you through the process, and give you the confidence and expertise necessary to manage your own IRA.