With the wealth of investment information available with just a few keystrokes and a quick google search people are becoming more and more likely to want to have more control over their retirement investments. Just stashing away money in the bank or allowing someone else to manage their 401K is a thing of the past. Many people are turning to a self directed IRA as a means to have more control over how their retirement funds are invested. A self directed Roth IRA affords the holder checkbook control over their retirement funds. This means they can make and investment in just about anything they would like.
The first step towards setting up a self directed IRA is to set up a special purpose LLC known as a self directed IRA LLC. The LLC is owned by the IRA account and managed by the investor who acts as the IRA Custodian. Once the IRA Holder’s retirement fund have been transferred into the LLC’s bank account the investor can make such investments as they see fit. The account holder can now act quickly when an opportunity presents itself. They can even invest in real estate. Any gains made from these investments simply go back into the IRA account and are not taxed.
Many people who want to take active control of their massive IRAs (which for the average American are their largest liquid asset) are transitioning to a self directed IRA. These types of IRAs are completely legal under the IRS code that applies to IRA Contributions 2011. Now the investor finds themselves able to invest in all manner of opportunities that were previously denied to them such as foreclosures, mutual funds, commodities, or private businesses. As long as the money flows back into the IRA it remains tax-free.
Self Directed Roth IRAs provide the IRA Holder with a variety of investment opportunities, but they are not without some risk. The account holder should still be very careful with how they invest their money. This is their retirement and as such should be treated with kid gloves. Risky investments should be avoided. The account holder should become more and more risk averse as the date of their potential retirement draws closer. It will be hard to make up any losses the closer the retirement date gets. All that said, a self directed Roth IRA is definitely an option for the savvy investor.