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For Sophisticated Investors OnlySelf-Directed IRAs

The power and flexibility of a self-directed IRA is not for everyone. With flexibility comes choices, and choices require more detailed investment knowledge. Less active investors find that the time required to find and make investment choices is not wor

By: Bill Humphrey

IRA Insights

We often hear comments or concerns from securities-based firms and companies who caution retirement investors about the myriad of rules related to nontraditional IRA investing. It is true that the rules relating to self-directed IRA investing are new to many investors, but the basics are not complex. Sophisticated retirement investors are discovering that the investment options open to self-directed plans are well worth the additional education and effort.

The additional knowledge and skill required to best grow a self-directed IRA presents an opportunity for financial professionals such as CPAs and independent investment advisors. Creative and motivated retirement investors need a support team to help them analyze and select investments. The world of non-traditional investments presents opportunities that have previously been out of reach for most retirement plans. With a self-directed IRA, those investments are suddenly viable options. Since many investors are not familiar with the rules, we offer educational programs to help both the investors and their advisors learn the details for a wide variety of self-directed plans.

Who should consider a self-directed IRA? Self-directed IRA benefits are often best realized by retirement investors who fit into one or more specific categories. If you are considering a self-directed IRA for yourself or for a client, consider the following questions:

1. Are you or your client a creative investor willing to find investment opportunities in areas other than just securities?
2. Does your personal investing experience include non-traditional assets and have you been successful in those investments?
3. Do you occasionally discover an investment opportunity that leaves you thinking, “If I only had the money, I could have taken advantage of that?”
4. Are you comfortable using leverage and interested in taking advantage of the potential of using leverage in your retirement plan?
   

If you answered yes to one or more of these questions, then a self-directed IRA may be a perfect fit for you or your client. However, affirmative answers to both of the next two questions are critical before you go forward:

1. Are you and/or your advisor(s) willing to help you analyze investments and make informed investment decisions on non-traditional investments? AND,
2. Are you and/or your advisor(s) willing to learn about the power and advantages of self-directed IRAs and the rules that go along with them?
   

The core of a self-directed IRA is “self.” That “self” is you, the investor. With a self-directed IRA, the account owner or their advisor makes all decisions. Without a knowledgeable investor and/or advisory support system, the tremendous power of a self-directed IRA cannot be harvested. We occasionally have clients that like the idea of self-direction and enthusiastically open an account but quickly get frustrated because they don’t know what to do with the account. For those individuals without the time or interest in finding investment opportunities on their own, the key is to have an advisor to help with the investment selection and planning. As the IRA administrator, we are not able to provide any investment advice or products. All truly self-directed accounts are directed by the account owner or the advisors they select. Through that control, they are able to make their own choices and grow their plan assets to provide themselves a comfortable and prosperous retirement.

The most important service that Entrust Group offices provide is education. Through teaching, we help investors and their advisors understand the power of a self-directed IRA and how tax-deferred plans work. When an investor is considering a real estate IRA, they often have many questions because they have no experience with using an IRA for anything other than securities. To help investors and their advisors open the door to nontraditional investment opportunities, we created specific classes covering a wide variety of topics. These classes introduce such topics as what investments are available for self-directed IRAs and how to open what is often called a “Real Estate IRA.” For investors with more specific questions and investment types, we can customize classes to meet their individual needs. Visit our website for a list of class offerings or contact us to schedule a class for your group.

Bill Humphrey, a Colorado CPA, is President of Entrust New Direction IRA, Inc. Serving the states of Colorado and Wyoming www.NewDirectionIRA.com

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