The Self-Directed IRA: Finally, You're In Real Control Of Your Retirement Wealth

The Self-Directed IRA (SDIRA) is a tool you should get to know especially if your retirement funds are missing a few zeros behind them.

Here's why. It's good to have an IRA (whether it's a Roth IRA or a traditional IRA) because of the many advantages it offers. However, very often not only are you stuck with the low returns of mutual funds or stocks, you're also limited to only the investment products available in the plan.

The Self-Directed IRA changes all that. It gives you full control to turn almost any taxable investment into a tax-free investment. This means you can achieve exceptionally super high returns very quickly. Remember, whereas you're limited in how much you can invest yearly in your IRA, there's no restrictions on how much your investments can earn tax-free.

This powerful tool is just about one of the very few vehicles that gives you the kind of control to invest in the high yield transactions of your choice (such as real estate). Combined with the tax-free compounding benefit of a Roth IRA, this retirement financial planning vehicle can allow you to achieve significant tax-free wealth in a relatively short time.

But don't be misled. There are many banks and financial institutions that are using the term Self-Directed as a marketing ploy. What they really mean is you can choose among the financial products they offer. You can't really direct them to acquire investments outside of the choices they give you.

A Self-Directed IRA is administered by trust companies approved by the IRS. But they are not in the business of providing financial advice nor are they in the habit of pushing any type of financial investment product in the manner a broker would. They're there only to act upon your instructions.

The trust has the ability to acquire the following types of investments upon your instructions

Setting one up is as easy as opening a checking account. You will usually complete an IRA Application Form, an Account Transfer Form (when you convert a regular or Roth IRA) and an Authorization To Release Form.

Another word of caution. With the flexibility and control you get with this tool comes a lot of responsibility on your part. The first of which is you must ensure you are dealing with a reputable company approved by the IRS and that knows what it is doing (especially when you plan on investing in real estate using your IRA).

In addition, there are certain investments as well as transactions that are prohibited. You must know what they are. Here are some examples. You cannot buy your primary or second home in your IRA. Antiques and art works are considered prohibited investments in your IRA.

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Now that you've uncovered this secret, take advantage of it to maximize your retirement funds tax-free. Speak to your CPA or your financial advisor on how you can use this powerful retirement planning tool as you're saving for retirement.

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