Pros & Cons of Self Directed IRAs (SDIRA)

I recently read an article on the Pros and Cons of Self-Directed IRA (SDIRA) investing.  If you don’t know what a Self Directed IRA is, you might want to check out my last video which talks about what a self directed IRA is and some of the things you can invest in with your SDIRA.  In the article I read, the author pointed out what he considered to be 3 Pros and 2 Cons of SDIRA investing. The author referred to 3 pros

#1 Tax-Free or Tax Deferred

#2 Safe and Sheltered Vehicle

#3 You Control the Investment

I agree with the author’s 3 pros.  When you invest in a Self Directed IRA, you can either have Tax-Deferred in the traditional SDIRA, or tax-free in the ROTH IRA account.  With the tax deferred traditional SDIRA, you pay the tax when you withdraw the money, with the Roth IRA, your contributions is made with after-tax dollars so your account grows tax free. Either way, you are growing your money with your self directed IRA. The second pro is that SDIRAs are a safe and sheltered vehicle.  I learned from the article that it is very difficult to sue an IRA account since its technically a trust account. The 3rd Pro is HUGE.  With a self directed IRA, you, the owner, control the investment.  You get to decide what to invest in with your IRA.   Yes, you have to be responsible for your own investments, but if you invest in things such as Real Estate or notes backed by real estate, you can potentially earn a great deal more than that from traditional investments.

The author also wrote about what he thought was 2 cons:

#1 Fees and Paperwork

#2 Heavily Regulated and Complicated

This is where I tend to disagree a little with the author.  Yes, there are fees and paperwork, but if any of you have a traditional IRA with a broker and haven’t talked with them lately, you might be in for a big surprise.   Most brokers are now going to start charging you annual fees based on the amount of money you have invested.   After talking with my broker, the fees in my traditional IRA were going to be higher than those of my self directed IRAs.  While I disagree with the fees being a con, I do however agree that the paperwork can be a little hard to get used to if you are new to Self directed IRA investing.  The paperwork is necessary so that you can track and authorize the IRA company to invest your money.  So with that in mind, although completing the paperwork might seem like a pain, I think the paperwork is a necessary part of the SDIRA; otherwise you would have no record or authorizations and transactions in your account.

The 2nd con – heavily regulated and complicated; all retirement accounts are heavily regulated including those with traditional investment companies.   I think some people would rather not have to worry about the rules, but if you take the time to educate yourself on what you can and cannot invest in, it won’t be so overwhelming.   One rule you want to make sure you follow is to not invest in yourself or a family member because that will disqualify your IRA investment and you would be subject to tax and potentially additional fees.

I do think the pros outweigh any con in self directed IRA investing, especially when you use your SDIRA to invest in promissory notes backed by real estate.  Not only is this a safe investment because it is backed by the real estate, it is one that can potentially earn double digits returns on your investment.

If you have an IRA that isn’t performing to your needs or expectations or a retirement account with a former employer, we would love to show you how we can work together to increase your returns exponentially through a Self Directed IRA.  If you do have a SDIRA and you would like to learn more about making your IRA work for you to earn potentially double digit returns, I encourage you to touch base with us.

Bike Homes forms Joint Ventures (JV) with their investment partners to help them grow their Self Directed IRAs through investing in Promissory Notes backed by Real Estate.  Our goal is to provide our investors with exponentially better returns than they can get through traditional IRA investing.


By | 2017-04-23T11:02:08-04:00 November 29th, 2016|Self Directed IRAs and Investing|Comments Off on Pros & Cons of Self Directed IRAs (SDIRA)

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