Self-Directed Retirement Account Investing

AB Capital Holdings LLC and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

Unlocking the Power of Choice in Your Retirement Planning

Introduction

Retirement planning is a journey that requires foresight, planning, and smart investment choices to succeed. One avenue that offers a higher degree of control and flexibility in retirement planning is self-directed retirement accounts. Unlike traditional retirement accounts, self-directed options allow individuals to invest in a wider array of assets, opening up opportunities for potentially higher returns and personalized investment strategies.

What is a Self-Directed Retirement Account?

A self-directed retirement account is a type of investment account that gives the investor more control over their retirement savings. Unlike standard retirement accounts, where investment choices are often limited to a selection of stocks, bonds, and mutual funds, self-directed accounts can include a broader range of assets like real estate, precious metals, private placements, and more.

Types of Self-Directed Accounts

• Self-Directed IRA (SDIRA): This is a traditional or Roth IRA in which the investor has more flexibility in terms of what they can invest in.

• Solo 401(k): Ideal for self-employed individuals or small business owners without employees, this account type allows for higher contribution limits and various investment opportunities.

• SEP IRA: Simplified Employee Pension plan that allows for higher contributions than a standard IRA, suitable for self-employed individuals and small business owners.

The Benefits of Self-Directed Investing

• Diversification: By investing in a variety of assets, you can reduce risk and potentially increase returns. 

• Control: You have more say in where your money is invested, allowing for more personalized investment strategies.

• Potential for Higher Returns: Some alternative investments have the potential for higher returns compared to traditional stock and bond investments.

Risks and Considerations

• Complexity: These accounts can be more complex to manage, requiring a good understanding of various investment types.

• Due Diligence: It’s crucial to research and understand each investment thoroughly to mitigate risks.

• Rules and Regulations: There are specific IRS rules regarding self-directed accounts, and violating them can lead to penalties. Choosing a quality Custodian can help ensure compliance is maintained.

Starting with a Self-Directed Retirement Account

• Choose a Custodian: Find an IRS-approved custodian who specializes in self-directed accounts. (It should be noted that these custodians are not banks or brokerage firms. If you were to contact a brokerage firm and ask if their IRA accounts are self-directed the answer would most likely be, “yes”. Stating that you can invest in any stock, bond or fund offered by the brokerage.)

• Plan Your Investment Strategy: Consider your retirement goals, risk tolerance, and investment knowledge.

• Understand the Rules: Familiarize yourself with the IRS regulations regarding self-directed investments.

• Diversify Your Portfolio: Don’t put all your eggs in one basket; spread your investments across different asset classes.

Conclusion

Self-directed retirement accounts offer a unique opportunity for those who want more control over their retirement investments. With the potential for higher returns and the ability to diversify, these accounts can be a powerful tool in your retirement planning arsenal. However, they also require a higher level of involvement and understanding of investment options and regulations. As with any investment, it’s essential to do thorough research and possibly consult with a financial advisor to align these strategies with your overall retirement goals.

To learn more or gain further insight into potential custodians for Self-Directed Accounts, email [email protected].