IRA Financial’s Adam Bergman Esq. explains why you need a custodian for you IRA, especially if you want to self-direct the plan and invest in alternative assets, such as real estate.
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According to the IRS, every Individual Retirement Account, or IRA, needs a custodian. You custodian must be held in one of three places: a bank, another financial institution, or a state-chartered trust company, such as IRA Financial Trust. These places are regulated and therefore will keep your retirement plan in check so there is some type of control over the tens of millions IRA accounts out there.
Most banks and financial institutions who offer IRAs focus on traditional assets. Generally, you can invest in stocks, bonds, mutual funds, ETFs and the like. Essentially anything that is publicly traded. Companies like Wells Fargo, Fidelity and TD Ameritrade are traditional custodians. However, if you want to invest in alternative assets, you will need to look elsewhere.
Most banks and financial institutions earn money by either holding your money, or by pushing you towards investment choices they offer. Special custodians, like IRA Financial Trust, do not offer investment advice and make money by administering the plan. Our job is to ensure your money gets to the investment you choose and to ensure it stays within the rules laid out by the IRS.
Therefore, if you are looking to invest in non-traditional assets, which boil down to those not publicly traded, you need a special custodian. The most popular alternative investments include real estate, precious metals, hard money loans and, more recently, Bitcoin.
By utilizing a Self-Directed IRA, you are control of your investment choices, no matter what they may be. So long as they are not prohibited by the IRS and are legal on the federal level, you can basically use your IRA to invest in anything. Many banks do offer Self-Directed IRAs, however they require custodial consent before making an investment. Basically, they don’t want you taking chances with your retirement funds. The more money in the account, the better off the bank is.
However, IRA Financial doesn’t care what you invest in – that’s not our job. It’s up to you, the investor, to decide what you are comfortable investing in. In fact, you can use our app to set up your plan. Soon, you will be able to make investments directly from the app – Stay tuned!
Lastly, we are not saying the “big guys” are bad. They obviously have a large share of the marketplace and should be considered. If you just want a simple IRA and just invest in traditional assets, you should look into them. Alternatively, if you want to invest in alternatives, like real estate, you are better off looking at a custodian that focuses on those types of assets.
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Join us next episode as Mr. Bergman discusses the Self-Directed IRA operating agreements and why they are important for anyone looking to invest in alternative assets.