Why It’s Important To Open A Self-Directed IRA This Year

Estimated reading time: 3 minutes(Last Updated On: November 30, 2018)

The unfortunate truth for many retirement savers is that they aren’t able to accumulate large nest eggs merely because they never got started. It’s a simple fact that a person that already has a self-directed IRA set up is much more likely to contribute to it in a given year than a new saver is to set up an account in the first place.
But that’s just one of the reasons why it’s important to open a self-directed IRA this year if you don’t already have one.

The Power of Time. It might not seem intuitive, but the contributions a person makes to their self-directed IRA each year are not likely to comprise the bulk of the account value after a number of years.

For example, let’s look at an individual who makes $5,000 contributions to their self-directed IRA each year, and who makes investments that grow at an annual rate of 8%. Let’s further assume that this individual makes these contributions every year from the age of 25 until they’re 45, and then doesn’t make any additional contributions to their account after age 45.

By the time they reach age 65, their account will have a value of over $1.1 million, even though they only contributed a total of $100,000 of that amount. The rest of their account balance is attributable to earnings, interest, and compounding on those amounts. The best way to increase the chances of accumulating the largest possible amount for retirement is to give your money time to grow.

More Investment Choices. A self-directed IRA will give you a much greater range of investment options for your retirement account. These include real estate, precious metals, private equity, private debt instruments, and more. IRAs with traditional custodians (such as banks and discount brokers) don’t permit you to make these types of investments. Having more investment choices will let you save for retirement in a way that exactly matches your investment philosophy.

To Build Good Habits. Once you open a self-directed IRA, you’ve already established a precedent for yourself. You can more easily build future contributions into your budget (which will greatly increase the chances that you’ll actually make them) because you already have an account set up to accept them.

Remember that you don’t have to make your entire annual contribution to your self-directed IRA all at once. It’s also possible to break it down into monthly amounts (or whatever frequency you wish) and make them over the course of the year. But you have to have an account set up in order to do so.

The amount of time you’ll need to fill out the necessary paperwork for a new self-directed IRA isn’t as much as you might think, and it’s worth completing that paperwork sooner rather than later. Contact a self-directed custodian such as Quest Trust Company today in order to get started.

2 thoughts on “Why It’s Important To Open A Self-Directed IRA This Year

  1. I currently have a roth ira through Primerica but just realized how much their fees are really hurting my growth potential. I was just educated on what a self directed roth ira is and how its much better for growth due to the low or non existent fees. I would like more information on how a seld directed roth ira works and I want to know if I can roll over my Primerica roth ira to a Quest Trust Company roth ira? Do I need to have a lot of experience in the market to open up a self directed roth ira, or does your company assist with this kind of account?

    1. I also want to open a self directed Roth IRA, if I understand how Roth works, I can open it and add to it depending upon how much income I am make this year… To open I can transfer my Tulsa teacher retirement with Fidelity…..but I am now 73 and know if i will work ..I can open it…?..

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