One question I am consistently asked is “What is a self-directed IRA?”   Or, I’ll receive a comment such as “ I have a self-directed IRA with a major financial institution. Can I buy real estate?”  To clarify, a self-directed IRA is legally no different from any other IRA, although not all firms can offer you a ‘self-directed IRA’. 

The term “self-directed” means that you, the investor, can select alternative investments that are permitted by the IRS. There are over 40 different types of assets (or asset classifications) that you can ‘self-direct’ your IRA funds into, including real estate, mortgages, notes, and private placements such as investing in a business, to name a few.  Depending on your investment strategy, and how much diversification you need, these alternative investments within your IRA can make sense.

Traditional investment plans allow you to invest your retirement funds into stocks, bonds or mutual funds.  Through a self-directed IRA administrator, such as The Entrust Group,  you can invest your IRA funds into real estate, notes, limited partnerships, commercial paper, and many other types of assets. 

I like to think of  my self-directed IRA as a second identity. I consider all of the same things that I would with my traditional retirement investments, such as appreciation, income, cash flow, tax benefits and value.

It’s a fact that the future of Social Security and other programs designed to assist us during our retirement are in question. By utilizing a self-directed IRA and selecting alternative investments, you have the ability to potentially compound your retirement savings into a much larger nest egg.

And, best of all, the returns on these investments are tax-deferred or tax-free!

This entry was posted on Thursday, March 1st, 2007 at 2:40 pm and is filed under Self-Directed IRA. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.