When considered broadly, perhaps the most powerful aspect of a self-directed IRA is that you have the greatest degree of control over your financial future. Unlike traditional employer pension plans (which give you no opportunity to invest wisely and maximize your retirement nest egg based on your individual choices) or 401(k)s (which generally limit your investment options to a very small number of choices), a self-directed IRA puts you in complete control.
But sometimes handling all this control can be a heavy burden. You may be comfortable using your self-directed IRA to invest in assets that you’ve had prior experience with, but what if you’re looking to invest in something new? That’s the time when you may have to decide to seek professional assistance with your self-directed IRA investments.
When You’re Spending Too Much Time on Your Portfolio. It’s obviously important to spend time doing the financial planning for retirement, including making investment choices, deciding on a withdrawal schedule, and even planning your annual contributions. But if you find yourself spending too much time administering your account, whether it’s because your account has grown too large or contains too many different assets, or because your portfolio includes assets with which you have little experience, then hiring an outside expert may be a good use of your funds.
When You Aren’t Confident in Your Investment Choices. If you find it difficult to commit to making particular investments with your account, or aren’t confident in the investments you’ve already made, then seeking outside help can help you get over the “analysis paralysis”.
When Your Investments Require Management Expertise. As you are likely already aware, different types of assets require different levels of involvement. Consider, for example, how much involvement and management you need to exert over investment in a stock market index fund as compared to a single-family home. If you don’t have the experience to confidently manage a particular asset in your account, get help.
When You’re Spending Too Much Money. Different asset classes may also require different levels of maintenance fees and expenses in order to maintain. Again, consider a piece of residential real estate versus a stock market index fund. You’ll spend nothing maintaining your index fund position (the management fees are automatically paid by the fund), while you’ll be responsible for upkeep of the real estate. If you’re doing this all yourself, you may not be able to accomplish it in the most cost-effective manner. If you find yourself spending too much money trying to accomplish these management tasks, then consider bringing in help. Believe it or not, sometimes bringing in outside expert assistance will end up saving you money, even though you’ll be paying additional fees for their assistance.
Because your goal with your self-directed IRA should be to maximize your account value, don’t let ego or pride get in the way of maximizing your nest egg. Sometimes bringing in outside help is the best way to meet your long-term retirement goals.